Understanding the Private Equity Management Buy-Out (MBO) concept

Management Buy-Out (MBO ) is a form of short-term investment that involves buying a company from its founding owners or from an outside owner. It is a form of investment in which a group of investors ("management") buys the shares of a company from a previous owner. This gives management control of the company and additional responsibility for its management and development.

Management may aim to redefine the company's strategy and objectives, improve its operations through restructuring, or develop new activities. MBOs can also include access to additional funds to invest in the company and its activities.

Financing for MBOs can come from management's own funds or from private equity firms or banks, which lend their own funds or underwrite loans through a strategic partnership with management.

MBOs are often used to consolidate control, and offer owners and management complementary benefits as they bring control and profits together in a single move. This can help break down barriers between shareholders and management, which is often necessary to encourage better management and strategic direction.