MBH Corporation offers alternative route for private companies

Imagine you are a business owner who has spent the past 10 years building the company you own.

What do you do when it is time to move to the next level?

Well, the options are limited. You try to find a buyer, or possibly, if you are big enough, look to list the firm you have nurtured.

Neither is likely to fully fit your requirements, particularly if you don’t yet want to walk away and both alternatives, to a lesser or greater degree, will result in a loss of control.

And in the case of the buyout, it means possibly working with the acquiring company as part of three- or five-year earn-out.

“The problem with us entrepreneurs is we are just not very good at being told what to do,” says Callum Laing, drawing on first-hand experience.

“It very rarely works out well. You end up with an accountant telling an entrepreneur how to run their business.”

Laing thinks he has found an imaginative alternative that allows bosses to maintain control of the companies they have founded while taking them to that next level.

His MBH Corporation is a buy-in business rather than a buyout specialist.

In short, it acquires well-run companies that have a long track record of success – sometimes in some ‘unsexy’ sectors.

Management is probably not so much looking for the exit as attempting to get to the next level; or is trying to secure the option to sell-up at some later date if it wants.

Not for sale 

“Most of these businesses are not for sale,” says Laing.

Crucially, while MBH provides the central administrative functions, the owners then carry on managing their creations.

All deals are done for paper – on an earnings accretive multiple of around five times earnings before interest and tax (EBIT) – and there is a perpetual share earn-in linked to the profitability of the company.

So, the model rewards long-term ownership and commitment.

MBH itself is a British public limited company that adheres to the gold standard corporate oversight of the UK Listing Authority.

However, the shares are quoted on the Frankfurt exchange as the rules there make it easier to issue new equity and don’t require MBH to be centrally managed.

Founded in 2018, MBH currently has 11 firms working under its umbrella, having added Logistica Training for £5.8mln in June 2020.

In the next year, Laing and his team are hopeful of adding another five to 10 to that roster.

Debt alternative

The June acquisition was partly paid for using a portion of a €50mln bond listing that has been freshly launched on the Irish Stock Exchange, rather than equity given the current depressed MBH share price, which has been hit by the indiscriminate pandemic sell-off.

The ownership of the company is 70-30 in favour of the business owners, who tend to be motivated, long-term holders.

The 30% free float is held by private investors and ‘high net worths’, though some of the smaller, more…