Management Buy – out (MBO)

Management Buy – Out – Management Buy – Out or MBO is a process of acquisition of a company by people who are already running it or working for it. This corporate action occurs usually when a particular company or any of its units are running in loss and face closure or in case there is a takeover bid for same.

In this situation, the senior executives or management of the firm can pool in all their financial resources along with the backing of an external financial institution to buy the interest and assets of the company; attempting to run it more efficiently and properly. This transaction appeals positively to senior managers as they can have a chance of running a business of their own instead of just being employees working for same.

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A management Buy-out is a favorable option for small private businesses who do not wish to run their business anymore and also beneficial for large organizations that wish to sell off units that are not a core part of their operations. MBO also has an advantageous edge over MBI as existing managers are buying and controlling it and chances of success in this case are quite substantial as they are already aware of all operations and functions of the company.

Edited and Updated 08th March 2014

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