Understanding an OBO or Owner Buy Out

An OBO (Owner Buy Out) is a form of [Private Equity] financing (/en/blog/quest-ce-que-le-private-equity-pe) used to enable the rightful owner to buy the company he has created or invested in. This form of financing is particularly attractive for business owners who want to retain full control of their company and avoid a hostile takeover. Once financing has been obtained, the owner can buy back the company, becoming the sole controlling party.

The OBO is essentially financed by equity and bank loans secured by the company's assets. Debt is represented by short- and long-term bank loans, as well as loans and collateral secured by company assets. The equity portion is represented by the owner's personal investment, as well as investments from angel capital, pension funds or institutional investors.

The OBO is advantageous for the owner, as it gives him or her full control of the company and enables him or her to enjoy the benefits of ownership. However, OBOs entail a number of risks, including the risk of default and the risk of the company's inability to repay debt, which can lead to investor flight and negative consequences for the owner and other shareholders.