HOW would you like to invest £50,000 sterling, as a senior manager, and now have an investment worth £6.42 million? Or, as an employee, invest just £750, and have an investment worth £96,250?

You can't. You could only have participated in this dream investment by being part of the management buyout (MBO) of the Belfast International Airport in 1994. These investors, and the other shareholders, have now agreed to sell their company to TBI, a British property company, for £107 million in cash and shares.

The return will be a staggering 128 times the original investment in just two years. Institutional investors will also show very handsome gains. The Dublin based venture capital group, ACT, for example, invested £0.6 million in equity and loan stock. This now has a value of £2.6 million. And the largest investor, Mercury Asset Management (MAM) receives £25.4 million.

Part of the consideration involves a dividend payment of £2.4 million. This represents a whopping dividend yield of 400 percent.

The deal, however, is conditional on TBI shareholders approving the purchase of the airport next month. As the deal is earnings enhancing for TBI, it should be approved, but the unease about investment in Northern Ireland, following the recent flare up of violence, has obvious negative implications.

While the airport was acquired in 1994 for £32.75 million, the deal, in common with other MBOs, was highly leveraged. The management team trio - Mr Jim Dornan, managing director, Mr Greg Ham ill, finance director and Mr James Mairs, operations director - put up only £150,000 in equity between them, or £50,000 apiece. The 200 employees put up another £150,000, or an average of £750. Around 70 per cent of the employees took up the offer. The 30 per cent who did not must be feeling pretty miserable now.

The financing of the MBO was not untypical, with the institutional investors putting up virtually all the finances and the management and employee shareholders putting up very little. The consideration amounted to £32.75 million, but the estimated cost of putting it together amounted to £2.75 million. Also, the vendor, the British Department of Transport, received £15.15 million cash from the airport.

The MBO was financed as follows:

. Management and employees, equity £300,000, for a 50 per cent stake.

. Mercury and other institutional investors, equity £300,000, for a 50 per cent stake.

. Deep discounted loan £15.4 million, provided by Mercury and other institutions.

Senior debt of £19.5 million provided by the Bank of Scotland.

. Working capital £3 million from Bank of Scotland, but this was not taken up.

TBI, which purchased the smaller Cardiff Airport last year, is paying a higher multiple than the MBO. It amounts to 12.2 compared with 10.7. So did the British government sell off the Airport for too little in 1994?

Its privatisation programme is riddled with companies being sold for too little and the losers have been the British taxpayers. It would obviously have been better served by retaining part of the equity in the case of Belfast Airport, it would now have a share of a bigger cake with a higher multiple. The MBO team, of course, had to have an incentive. But this takeover was a good deal less risky than most. Apart from almost guaranteed profits and a good cash flow, it was very bankable.

What better financial security than an important Airport, with growing traffic and 200 acres of land adjacent to the Airport?

This MBO was an ideal form of partnership as it incorporated employees as well as senior management. And it has worked remarkably well.

Since the MBO, profits have accelerated. Operating profits grew from £5.3 million to £8.2 million last year. Significantly, turnover grew at a slower rate, from £22.8 million to £25.8 million, thereby increasing margins. These figures clearly show that privatisation does work for the new shareholders.

When TBI acquired Cardiff Airport last year, the average spend per head was £3.5. This has since been increased to £5.71, which was partly responsible for the 63 per cent increase in operating profit to £5.2 million.

The figure for the Belfast Airport is a mere £1.93 per person. TBI is convinced that this can be boosted considerably. But will the management and employees have the same incentive now?

Around half of the consideration is in TBI shares and half in cash. The senior management and employees (they will continue to run the Airport) are understood to have decided to take up a large proportion of their entitlement to the TBI shares. This will reduce their capital gains liability (40 per cent) and should also give them an incentive to keep the profits flowing.

The potential rewards from TBI, however, cannot be remotely as dramatic as the return on their investment in the Belfast Airport.