A management buyout (MBO) is a particularly enticing avenue for the existing management staff as it offers high potential rewards from taking ownership of a business as opposed to continuing as employees. The process is a common exit strategy for large corporations who wish to pursue the sale of divisions that are not part of their core business, or by private businesses where the owners wish to retire.
It is important to recognise the difference between an MBO and an MBI; the latter is where an external management team acquires a company and replaces or enhances the existing management team. The clear advantage with an MBO is that the team planning the acquisition are familiar with the company with no learning curve or transitional period required, and can easily maintain existing business relationships. However, there may be a skill gap left by the departing owner.
