how management buyouts mbos work
as noted above management buyouts occur when a corporate manager or team acquires the business they manage from the owner s the business is purchased from a private owner and or any shareholders in the company the acquisition includes everything associated with the business including the assets and liabilities mbos often take place because the management feels they are better equipped to help the company grow and succeed financially these transactions are key exit strategies for the financing required for an mbo is often quite substantial and is usually a combination of debt and equity that is derived from the buyers financiers and sometimes the seller since it uses a significant amount of borrowed capital it is considered an lbo as such it may also be called a leveraged management buyout while management reaps the rewards of ownership following an mbo they have to make the transition from being employees to owners which comes with significantly more responsibility and a greater potential for loss reasons for an mbomanagement buyouts are risky ventures that s because they may or may not work so why would a company s management consider doing one the following are some of the main reasons that corporate management may consider undertaking an mbo 