Analysis of a Management Buyout Opportunity

Abstract

This report documents the procedure and analysis used to investigate an opportunity to orchestrate a buyout of a small technology business unit from Swift. This buyout is unique in that the person contemplating the buyout is also the current manager of the product group. Within this project, the performance history of the business is traced and business problems are identified and analyzed. After a potential for growth is recognized, the ethical dilemmas facing the author are considered as the author contemplates taking his employer’s business into the private sector for personal gain.

After ethical issues are resolved, additional individuals are recruited to bring experience, expertise, and financial leverage to the planning process. The key components to implementing the buyout plan are identified, including developing a compelling high-level business plan, determining the level of funding necessary for the venture, and obtaining buy-in from venture capitalists.

Another key component of implementing this buy out plan is obtaining backing from key players within Swift. It is vital that the author is able to effectively communicate a compelling story to Swift executives. The compelling story is that removing the business unit from Swift is not only in Swift’s best interest, but that Swift’s customers will also benefit from this transaction.

The determination of amount of funding necessary is usually largely dependent on the business plan; however in this case the overhead necessary to operate the business is relatively low in comparison to the salaries the TekNet team. Because of this, one of the major dilemmas for the author is the trade-off between personal salary and equity in the company. Naturally, the higher the required salary is, the higher the funding ratio is, and the less personal equity in the company. Another personal dilemma that is considered is timing, which plays a substantial role in the decision making process.

The personal salary dilemma ends up being a key component of the decision making process, which ultimately concludes to not act on the buy out venture at this point of the author’s career.