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Management Buyout

Management Buyout

A management buyout (MBO) involves the management team of a company combining resources to acquire all or part of the company they manage. Most of the time, the management team takes full control and ownership, using their expertise to grow the company and drive it forward.

For an MBO to be successful, vendors must be willing to sell the company at a realistic price and with a fundable deal structure. It is rare that a management team will have sufficient funds on their own to buy the company and therefore management buyout financing will be required.

Why pursue an MBO?

An MBO allows for a smooth transition of ownership. Since the new owners know the company, there is a reduced risk of failure going forward, other employees are less likely to be concerned, and existing clients and trading partners are reassured it will be ‘business as usual’.

Meanwhile, the internal changes and transfer of responsibilities between the vendors and management remain confidential, while any due diligence required by funders is often handled quickly.

Easy to arrange

The contracts and sales process itself for MBOs are usually fairly simple as buyers already have intimate knowledge of the company and so minimal due diligence is required.

Maintain confidentiality

As the business is being sold to internal buyers, confidentiality surrounding the sale can be much more easily maintained.

High chance of success

Generally speaking, companies purchased through an MBO have a high chance of ongoing success and profit.

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