Management Buyouts



A management buyout (MBO) is management's acquisition of their employer company from its existing corporate or individual shareholders. After playing a crucial role in building their company, managers often consider buying their company as the next step in the progression of the company's ownership.

Often, however, managers do not have the resources to effect a buyout on their own. Private Investment Firms recognize this and will partner with incumbent managers in the acquisition of the companies they run, but do not own. The investment firm will structure the transaction accordingly so as to permit significant management equity participation. The Private Investment Firm brings financial credibility to management’s ability to complete a buyout. Managers receive a generous equity stake in the newly capitalized company while retaining daily operating control. Managers gain a well funded, knowledgeable partner to help them grow the business.

An MBO can be instigated by the management, owner, or a third party. Existing senior managers that team up with a Private Investment Firm have a number of advantages over other bidders when competing for the purchase of a company since the existing management understands the company better than any other prospective bidder. In an MBO sponsored by a Private Investment Firm the transaction will be financed by the firm’s own equity, senior and debt and possibly mezzanine sources

MBOs create an opportunity of a lifetime for those fortunate enough to have the chance of participating in the ownership of their company.

One Source M&A Contact Plan

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