Business Services

Profile

This Business Services firm had just completed a Vendor Initiated Management Buy Out (VIMBO) with a 7 year earn-out. Cash generative, the business still depended on its founders.

Issues

The VIMBO left the business with a large balance sheet risk. If a founder died… could their family hope to redeem the earn-out Loan?

The ‘2nd generation’ shareholders were sacrificing income for future value. Yet, if they died… could their family realise that contingent value?

FAB Fix

FAB put in place a Loan Insurance scheme for the £9.5m VIMBO Loan. This covered the founders so that, were they to die, their family would receive full Loan redemption… they would be free and clear.

The Buyer Group each took out £1m Director Protection so that, were they to die, their families would be guaranteed £1m cash, tax free… regardless of what their shares were worth on the day they died.