Management Buy-out

Knowledge Center


Purchase of a business by its existing management. Explanation of Management Buy-Out.


  1. Summary
  2. Forum
  3. Expert Tips
  4. Resources


Management Buy-out?

Why register?

What is a Management Buy-Out? Description

Essentially, an MBO is the purchase of a business by its existing management, usually in cooperation with outside financiers. Buy-outs vary in size, scope and complexity but the key feature is that the managers acquire equities in their business, sometimes a controlling stake, for a relatively modest personal investment. The existing owners normally sell most or usually all of their investments to the managers and their co-investors. Often the group of managers involved establish a new holding company, which then effectively purchases the shares of the target company.

Reasons for the purchase of a business by its existing management

  • Certain parts of an organization are no longer seen as a Core Competence / no core activity by its parent company.

  • A company is in financial distress and 'needs the cash'. Compare: Turnaround Management

  • Parts of acquisitions that are not wanted.

  • In case of a family business: succession issues through retirement of the owner.

  • The management team wants to gain independence and autonomy, a chance to influence the strategy and future direction of the company and the prospect of a capital gain.

Attractiveness of the Management Buy-out approach to a seller

  • Speed. An MBO can be much quicker than a trade sale.

  • Strategic considerations. For example the selling party may not wish competitors to acquire control.

  • Confidentiality. The selling party may not wish to let competitors have access to sensitive information that would be disclosed during a trade sale process.

  • Familiarity. With an MBO the selling party can continue to deal with a management team with whom it has an established relationship.

  • Pricing.

Feasibility of a Management Buy-out? Criteria

  1. Sound and well-balanced management team.

  2. Business must be commercially viable as a stand-alone entity.

  3. Willing vendor.

  4. Realistic price (Valuation... Discounted Cash Flow, Net Asset valuation, P/E ratio).

  5. Buy-out must be capable of supporting an appropriate funding structure.

Typical steps in a management buy-out process

  1. Agreement in the management team as to who will become the managing director.
  2. Appointment of financial consultants.
  3. Assessment of the suitability of the buy-out.
  4. Approval to pursue the MBO.
  5. Evaluation of the seller's asking price.
  6. Formulation of business plan(s).
  7. Selection of equity advisors and obtaining written offers.
  8. Selection of legal consultants.
  9. Selection of lead investor.
  10. Negotiation of best equity deal.
  11. Negotiation of purchase of the business.
  12. Selection of auditors.
  13. Implementation of a due diligence test.
  14. Obtaining finance and other equity investment.
  15. Preparation of legal documents.
  16. Legal ownership achieved.

Management Buy-out Forum Help
To get access to this forum, you need to be a member: Please log in... | Register
Start a new discussion: Please log in... | Register

Management Buy-out Special Interest Group

Special Interest Group

Management Buy-out Education & Events

Find Trainings, Seminars and Events

Expert Tips - Management Buy-out Premium
Discover and utilize expert tips per method: Please log in... | Register

A Crucial Consideration in Management Buy-outs

Management Buy-out

Resources - Management Buy-out Premium
Access presentations, news and videos on each method: Please log in... | Register

Entrepreneurial Orientation in Management Buy-Outs and the Contribution of Venture Capital

Entrepreneurship, MBO

Introduction and Summary of Management Buy Out (MBO)

Initial Understanding of Management Buy Out

Internationailization of MBOs: Firm Strategies and Venture Capitalist Contribution

Management Buyouts


Management Buy-out


Mbo Buy-out


Management Buy-out


Mbo Buy-out


Management Buy-out


Mbo Buy-out


Management Buy-out


Mbo Buy-out

Compare with Management Buy-out:  Leveraged Buy-out  |  Acquisition Integration Approaches  |  Core Competence  |  Outsourcing

Return to Management Hub: Finance & Investing  |  Leadership  |  Strategy

More Management Methods, Models and Theory

Sponsor this knowledge center

Special Interest Group Leader
Expert? Become our Management Buy-out SIG Leader.

All you need to know about management

12manage for:

Management Smart Card

12manage in:

The perfect souvenir for your education program

Copyright 2015 12manage - The Executive Fast Track. V14.0 - Last updated: 2-4-2015. All names tm by their owners.