Owner Buy Out – OBO
The self-purchase, more commonly referred to by the acronym OBO (Owner Buy-Out), is an increasingly popular financial tactic among entrepreneurs seeking to rebalance their wealth between professional and personal spheres. This strategy involves a business owner selling a portion of their shares to a holding company under their control, often financed by a loan, to diversify their assets, realize part of their company’s value without detaching from it, and prepare for potential succession. Apex Capital delves into the intricacies of OBO, its benefits, and the crucial elements for the success of this complex process.
How Does an OBO Work?
An OBO involves the sale of a portion of a company’s shares by its owner to a newly created holding company. The acquisition is financed through a bank loan, with dividends distributed by the company being allocated to repay the loan. The entrepreneur, while liquefying part of their professional assets, retains management of their company, allowing them to reinvest or allocate the freed-up funds according to their aspirations.
Benefits of OBO
•Liquidity: The OBO converts a portion of the entrepreneurial value into liquid assets, usable for diversified investments or personal projects.
•Tax Optimization: Correctly structured, an OBO can reduce the tax impact, particularly regarding capital gains and business succession.
•Facilitates Succession: This strategy eases the transition towards a sale or transfer of the business by gradually separating professional and personal assets.
•Control Retention: It allows the entrepreneur to continue leading their company and supervising its development.
Key Considerations
•Increased Debt: The OBO increases overall debt, potentially limiting the group’s future investment capacities.
•Financial Risk: A decline in the company’s performance could jeopardize the loan repayment.
•Operation Complexity: A successful OBO requires adequate structuring on legal, financial, and tax levels, necessitating the involvement of specialized advisors.
Why Choose Apex Capital?
•Technical Expertise: With expertise in structuring OBOs, we ensure implementation aligned with your objectives.
•Personalized Support: Our team guides you through each phase of the operation, from structuring to completing the OBO, including financing negotiations.
•Tax and Financial Optimization: We aim to maximize the operation’s effectiveness from both tax and financial perspectives, considering your liquidity needs and succession aspirations.
To conclude
An OBO represents an advanced wealth strategy for entrepreneurs, combining liquidity and tax optimization while maintaining control over the company. However, given its complexity, it requires meticulous preparation and execution. With the expertise of Apex Capital, benefit from expert management to realize your OBO, fully leveraging its advantages while mitigating inherent risks.
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