A Management Buy Out (MBO) takes place when a group of managers buys the business they work in from its existing owners. 
This will usually require financial assistance from external investors or financing.
Buy-outs can vary greatly in both size and complexity but in general the members of the ‘managers' put in some of their own personal money in return for an equity interest (a stake) in the business.
What the managers invest varies. Financial institutions will expect a healthy financial commitment from the managers but it doesn't necessarily need to be a vast sum.
MBOs normally see the existing owners sell all or most of their stakes in the business to the new managers and their fellow investors.
The Purpose of MBO's
When a company decides to either sell or close either the whole or part of a business, it can often prompt a MBO. Some companies that are in financial difficulties decide that they want to sell off assets and get some cash in to stave off financial ruin. They may be much more open to MBO offers than they would normally be.
Family-run businesses are frequently taken over through MBOs because the existing directors may not have any children interested or capable in running the business. In these circumstances, they may be keen to ensure the business and its workforce continues to work successfully.
Many MBOs follow acquisitions – a company may buy another business and then find that not all of what it has acquired is needed. In this case it may offer the managers of that particular unit the opportunity to buy the business from them.
Managers frequently say that the reason they launched a MBO is because it offered them the chance to make a real impact on the business, to be able to direct strategy and decide what the business was going to do.
If the MBO goes well, they stand to make money out of it too.
How we can help
It is important to seek competent professional advice to avoid the real pitfalls. We can introduce you to an expert adviser who can help guide you through the process suited to your needs.