Manufacturing MBI out of administration
A UK precision-engineering business bought by an MBI team for £4.2m in 21 days. £800k equity + £2.6m ABL + £800k mezz. 62 employees TUPE'd, 4 CNC centres, AS9100 preserved. Year-one EBITDA moved from £180k to £980k.
Funding stack
| Instrument | £ | Security | Rate |
|---|---|---|---|
| MBI team equity | £800,000 | Ordinary shares 100% | — |
| ABL — receivables | £1,170,000 | 65% LTV on £1.8m debtor book | SONIA + 3.75% |
| ABL — plant | £1,320,000 | 55% LTV on £2.4m plant OMV | SONIA + 4.25% |
| ABL — stock | £110,000 | 40% LTV on £275k eligible stock | SONIA + 4.75% |
| Mezzanine | £800,000 | Second charge, 8% coupon + 2% PIK | 10% |
| Total | £4,200,000 |
What Chris says
"Manufacturing is the sector where distressed multiples make the most sense — real plant, real debtor books, real stock. An MBI team with £800k of equity and a working ABL relationship can lever 4× and land £4m+ deals in 3 weeks. Retail can't do this. SaaS can't do this. Manufacturing can."— Chris, AI deal adviser at Sell Ltd
Related
Frequently asked questions
What is a management buy-in?
An MBI is where an external management team acquires a business — as opposed to an MBO (management buy-out) where the incumbent team takes over. In administration, MBIs are common because the incumbent team's credibility is compromised by the failure. Sell Ltd's data: 34% of UK manufacturing administrations that avoid liquidation are MBI-funded.
How was the £4.2m financed?
£800k MBI team equity + £2.6m asset-based lending (ABL) secured on plant, receivables and stock + £800k mezzanine from a specialist lender. ABL provider was a mid-market fund at 65% LTV on receivables and 55% on plant valued by Sanderson Weatherall at £3.8m gross. Total gearing 4.3× EBITDA — aggressive but supportable on the industrial base.
Why ABL not senior term debt?
Two reasons. First, distressed deals close in 21 days — senior term debt takes 60–90 days. Second, ABL revolves against working capital which suits a manufacturer with £1.8m of debtors and £900k of stock. Term debt would have required a heavier equity cushion. See the financing guide for the full comparison.
What plant did the buyer get?
£3.8m gross plant valuation across 4 CNC machining centres, 2 EDM machines, 1 5-axis mill, plus tooling and fixtures. All owned outright — no HP or lease encumbrances. Manufacturing distressed deals are unusual because plant tends to be encumbered by asset finance; this seller was ex-family ownership with clean balance sheet on plant.
How did 62 employees TUPE across?
62 employees under reg 4. RPS statutory relief covered £238k. Buyer inherited £42k of above-cap arrears (senior tool-room engineers on £52k+ base) and £16k of DC pension arrears. No redundancies at completion. Post-completion (month 6) a 4-role ETO restructure removed layers of legacy supervision.
What is a supplier certification transfer?
Big manufacturing customers (aerospace, medical, auto) require supplier certifications (AS9100, ISO 9001, ISO 13485). These don't 'transfer' with the assets — the new operator must re-audit or notify the certification body of the ownership change (some allow, some require re-audit). This deal preserved the AS9100 audit trail via a rapid ownership-change notification to the certification body.
Did any customers walk?
Yes — 2 of 14 top customers moved production away, 1 during administration, 1 within 6 months. These represented ~£1.1m of £6.8m revenue. Sell Ltd's manufacturing admin data: 15–25% customer attrition is normal in the first year; 40%+ is a red flag that would have made the deal uneconomic at £4.2m.
What is 'contract novation' in manufacturing?
Formal legal replacement of the seller with the buyer as counterparty on customer contracts under Contracts (Rights of Third Parties) Act 1999 or common-law novation. In manufacturing, purchase orders assign easily under standard T&Cs but framework agreements (with tier-1 primes) often require formal novation deeds. This deal signed 4 novation deeds inside 60 days post-completion.
Was there any earn-out?
No cash earn-out to the administrator. There was a management ratchet — the MBI CEO's equity moved from 22% to 35% on hitting a 3-year revenue target of £8.5m. This aligns capital with performance without lockup on administrator distributions.
What was HMRC's position?
£420k of VAT arrears and £180k of PAYE arrears sat with the old company. Under Finance Act 2020 s.100, HMRC has secondary preferential status for VAT, PAYE, employee NIC and student loan deductions in insolvency. Neither transferred to the buyer — buyer only inherited liabilities that TUPE'd.
P&L 12 months later?
£5.7m revenue (down from £6.8m due to customer attrition), £980k EBITDA at 17% margin (up from £180k, 2.6%). Uplift drivers: (1) new procurement head knocked 8% off raw-material spend, (2) closed unprofitable low-volume product line, (3) rebalanced customer mix. Net debt paid down £700k. Interest cover 3.2×.
What would you replicate?
The MBI structure (external team, aligned equity, ABL against real assets) plus the 21-day speed. Sell Ltd's marketplace runs 4–8 UK manufacturing administrations per quarter at £2m–£10m consideration. Buyers register once, get sector-tagged alerts on live listings.