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

Business team discussing plan in the office

Could your business be owed money? PKF Francis Clark payroll team is recovering unclaimed employment allowance for clients

15 May 2026

Read

Dealmaking today: Uncertainty has a cost – don’t pay it twice

15 May 2026

Read
Female small business owner, working in her shop

Changes to small company accounts filing delayed

14 May 2026

Read
Two colleagues chatting whilst walking from a meeting room.

Changes to HMRC's approach to tax compliance for large businesses and beyond

14 May 2026

Read

Pillar 2 in the UK – FAQs on filing obligations

13 May 2026

Read
Two colleagues chatting and laughing while working.

People, culture and our journey to B Corp™

12 May 2026

Read
A skateboarder

Route One Retail transitions to employee ownership with support from PKF Francis Clark

12 May 2026

Read

Gifting property to your children: What you need to be aware of

7 May 2026

Read
A person in a black blazer is sitting at a desk, signing a document. The desk has various items including papers, pens, a framed certificate, and a small statue of Lady Justice.

Overseas R&D expenditure: What qualifies under new rules?

6 May 2026

Read

B Corp™ and the client experience 

5 May 2026

Read
Two colleagues deep in thought discussing what they see on a laptop

Employee share awards and restricted securities – the tax risks you should know

5 May 2026

Read
Employees of an international law firm sitting at a large table in a well-lit conference room.

The patent box regime and the importance of election timing

30 April 2026

Read