12 May 2022

Introducing the SUMBO – the subsidiary MBO

The acronym SUMBO may not become as well recognised as a FAMBO (family management buy-out). However, as we are in a period of economic uncertainty alongside an extremely buoyant funding market, I anticipate seeing an increase over the next couple of years in management buy-outs (MBOs) where the company is a subsidiary.

Push factors

Group strategies change – either they evolve slowly over time or more abruptly through a change of ownership of the group or by the appointment of a new CEO with their own views of the way forwards, perhaps driven by a need to move away from the problems of their predecessors.

Lack of goal congruence – subsidiaries can then find themselves at odds with where the rest of the group is going, or they no longer fit in and therefore don’t receive sufficient investment to take the business forwards. A similar situation may arise where the subsidiary was an acquisition that wasn’t fully understood, resulting in a lack of suitable support to continue pre-acquisition development.

Management frustrations – management may become increasingly frustrated with head office policies/politics and a lack of genuine local decision-making ability.

Pull factors

Control – members of the management team may have developed further and hanker for more control over their destiny.

Opportunities/missed opportunities – additional funding may help to develop the business/products further and make it more competitive. The management team can see the potential but need access to additional resources to cement the opportunities.

Risk and reward – the management team may feel that they want more reward for their effort, and they are willing to commit more to achieve more.

The broader picture

Now, I acknowledge all of the above factors are not new and have been around as long as the concept of groups of companies has been in existence. However, I would contend that the following may be among the reasons why we are seeing more discussions with management teams about SUMBOs:

  • Covid-19 and other political and economic instabilities – causing both owners of parent companies and management teams of subsidiaries to reassess what their strategic ambitions are, and management teams reassessing their own personal objectives
  • Events of the last few years may have meant parent companies facing challenges elsewhere in the group or cash availability has become challenging and so they need to consider selling off assets such as subsidiaries
  • Increased number of foreign-owned UK subsidiaries, with the UK operations as a result becoming more marginal or non-core
  • Increased number of new tech/new idea subsidiaries, i.e. companies who have sought to manage risk with a new venture by hiving it off into a subsidiary

Funding

The increase in push/pull factors has coincided with a funding market becoming and remaining extremely buoyant both in terms of the range or type of funding and the quantum. This has and will facilitate many management teams to be able to buy their business – even if they have little cash resources themselves.

PKF Francis Clark

A management buyout transaction can, by its very nature, be a process steeped in complexity and perhaps even mystery.

Our Corporate Finance team has advised on over 100 MBOs – this gives us the knowledge to demystify the process and to communicate in plain terms what is involved to all parties, particularly the management team itself, who may be going through the first corporate transaction they have been involved in.

We are often engaged in the first instance, on behalf of a potential MBO team, to review the feasibility of undertaking such a transaction for your business. This feasibility exercise typically covers topics such as potential valuation, structure, funding requirements and sources.

If any of the above has sparked the desire to speak to someone about a SUMBO (or any MBO) please let’s have a chat to discuss what may be possible and what your options are.

(Our next Deep Dive event is on succession and will include material on MBOs – the event is scheduled for 29 June 2022 and more details will appear on our website shortly).

Get in touch

Related insights

Group of business people in discussions sitting down around a laptop

FRS 102 revenue recognition changes are coming: is your business ready?

20 August 2026

Read

Breaking UK tax residence: what does it mean and why does it matter?

19 August 2026

Read
Warehouse operative using a tablet to manage inventory in a logistics warehouse, surrounded by stocked pallets and shelving, representing supply chain and international trade operations.

Avoid these common pitfalls on the road to export success

18 August 2026

Read
business people sit around a table and one, a man stands talking, they are in a modern office and all wearing smart suits

Our response to the key elements of the latest SRA consultation

18 August 2026

Read
Two professionals in business attire are having a conversation in an office setting with a world map on the wall behind them. In the background, four other people are seated and engaged in discussion.

Pillar 2: What you need to know before 30 September 2026

18 August 2026

Read
An outdoors group shot of PKF Francis Clark's new trainees at the University of Exeter

New accountancy and tax trainees start their careers with PKF Francis Clark

18 August 2026

Read
Man sitting at a laptop, looking out of the window

Could charity trustees be caught by the new close company director reporting requirements?

17 August 2026

Read
A father and his adult son are standing, leaning on chairs, at their family-owned upholstery business.

Why family investment companies are back in the spotlight

14 August 2026

Read

Companies House identity verification: enforcement is getting closer

11 August 2026

Read
Woman looking at her apple device a lock can be seen on screen

The Beacon CRM incident: lessons in cyber security, supplier risk and cyber assurance

11 August 2026

Read

Budget speculation puts capital gains tax back in focus for business owners 

7 August 2026

Read
New finance director shakes a colleague's hand

New finance director responsibilities

6 August 2026

Read