Deal structure
A management buyout is a sale of a company to its own senior managers, usually funded with outside capital such as debt or an investor.
In a management buyout, or MBO, your own leadership team buys the company from you. Managers rarely have enough cash alone, so they bring in lenders or a private equity partner to fund the price.
For example, a company sells for $20 million. The managers put in $1 million, a lender provides $9 million and an investor provides $10 million. The managers now run and co-own the business.
An MBO can protect culture and keep the team in place. The trade-offs are that managers may not have deep funds, the price may be lower than a competitive process, and you may need to finance part of it yourself.
Think about whether your team is ready and willing to take on the debt. Compare your options in private equity vs management buyout. See also leveraged buyout and seller financing.
Related terms
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