We were six months from a management buyout. Then we found out what it would actually cost. Here is what we did instead.

We had been running the business for ten to twelve years. My business partner and his father had built it from the ground up. Over that time, people came and went - the ones who were not right for it, and eventually the ones who were. A management team emerged. They understood the business. They wanted to take it on. And at the same time, we were ready to step back and move toward other things.

The management buyout felt obvious. It is what you do. The business was worth fifteen million. We had been talking about the MBO for about six months. And then the number stopped us: three million in CGT. That was the cost of doing it the standard way. We kept putting it off, not because we did not want to exit, but because we could not reconcile paying three million to crystallise something we had spent over a decade building.

Why the obvious exit is not always the right one

A management buyout is the default answer to the question of what to do when a business is ready to transfer to the people running it. It is clean. It is understood. It is what advisers recommend because it is what they know how to execute.

What it does not do is ask whether there is a better way to achieve the same outcome. The management team takes over the business. The founders receive the value. But the structure through which that transfer happens determines how much of that value the founders actually keep.

In our case, the standard MBO would have crystallised a three-million-pound CGT liability at the point of sale. That is not a rounding error. That is a third of a million pounds per family involved, gone on the day the deal completes.

The equity exchange vehicle

What Alex showed us was a different mechanism: an equity exchange vehicle, or EIV. Instead of a single crystallisation event, the equity releases over a five-year period. The management team takes on the business in a structured way, growing it inside a framework that protects them as they scale it. We are selling, but we are not crystallising the sale until five years out.

The CGT does not disappear. But it is deferred, and by the time it arrives, the capital has been repositioned into three separate self-administered family offices - one for each family involved. The tax that would have been three million becomes something we can each manage on our own terms, in our own structures, at a time of our choosing.

The management team, for their part, are not taking on the business with debt they cannot service. They are growing it inside a structure that is designed for them to grow it. The alphabetical share classes mean that until the voting rights transfer - which happens in stages, over the five years - control remains with the founding families. The management team cannot make decisions that affect the business without that consent. That is not a constraint on them. It is a protection for everyone.

The Dubai question

There is something else worth saying, because it is relevant to a lot of people in similar positions right now.

We had been thinking about leaving the UK. The world has changed over the last three years, and like a lot of people in our position, we had looked at Dubai. We had not moved, partly through inertia, partly because of the business. What we did not fully understand at the time was that if we had left, sold the business, and then returned - which is exactly what a lot of people have done - we would have faced CGT on the way back in under the new legislation.

The rules changed. If you leave the UK, sell a business, and then return within a certain period, HMRC can treat the gain as arising in the year of return and tax it accordingly. The people who went to Dubai to avoid CGT on their exit, and then came back, found themselves paying it anyway - without the structure in place to absorb it.

We would have paid three million in CGT on the way out, or paid it on the way back in. The structure gave us a third option: neither.

What the structure actually looks like

The EIV is built on three self-administered family offices - one for each of the founding families, and one for the management team family taking over. Each SAFO is a bespoke constitutional structure: a holding company, a governance layer, and a succession framework. The equity in the trading company releases into these structures over five years, in stages, as the management team demonstrates the growth targets that were agreed at the outset.

The result is a business that passes to the people who want it, in a way that protects them and protects the founders. The founding father's life's work is not going to waste. The capital being released is going into vehicles designed to grow it, not to hand a third of it to HMRC on the way out the door.

The question worth asking

If you are considering an MBO, or if you have been putting one off because the CGT number does not work, the question is not whether the MBO is possible. The question is whether the MBO is the right mechanism.

The Capital Audit takes ten minutes. It will show you where your structure stands, what an exit would cost under the current architecture, and what the alternatives look like. The numbers are yours. The decision is yours.