What is management buyout?

A management buyout (MBO) is a type of acquisition where the company’s management acquires the ownership of the business by increasing their equity stake or by purchasing assets and liabilities to leverage their expertise to grow the company and drive it forward using their resources.

What is a management buy-in (MBI)?

The opposite of an MBO is a management buy-in (MBI). While an MBO involves a company's internal management purchasing the operations, an MBI takes place when an external management team acquires a company and replaces the existing management team. MBIs involve companies that are led by poor management teams or are undervalued.

Are management buyouts a win-win?

When executed effectively, MBOs can be a win-win for buyers, sellers, investors, and shareholders. Since all sides are already familiar with each other and the company, the transition process is often smoother when compared to a buyout where an outside party is involved. Management buyouts can happen in every industry to businesses of any size.

Why should a company undertake an MBO?

The following are some of the main reasons that corporate management may consider undertaking an MBO. Gaining control. Members of management may not agree with the direction of the company. By executing an MBO, they may feel as though they have more control of the business, its success, and its future. Financial gain.