Management buyout

management buy-outmanagement buy outMBOmanagement buyoutsmanagementbuyoutbought by its managementbought out by managementbuy outemployee buy out
A management buyout (MBO) is a form of acquisition where a company's existing managers acquire a large part or all of the company from either the parent company or from the private owners.wikipedia
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Leveraged buyout

leveraged buyoutsLBOleveraged finance
Management and leveraged buyouts became phenomena of the 1980s.
Such seller notes are often employed in management buyouts or in situations with very restrictive bank financing environments.

Zavvi (retailer)

ZavviIn-Store Zavvi
On September 17, 2007, Richard Branson announced that the UK arm of Virgin Megastores was to be sold off as part of a management buyout, and from November 2007, will be known by a new name, Zavvi.
A management buy-out offer was led by managing director Simon Douglas and finance director Steve Peckham, for an undisclosed sum, though reportedly £1. As a result, Zavvi became the largest independent entertainment retailer in the UK. EUK, the company's main stock supplier, also the supplier to chains including Woolworths and Sainsburys, was not involved with the management buy-out but invested financially to support the new management team as well as employing most of the ex-Virgin buying team.

Liquid Comics

VirginDirector's CutLiquid
On September 24, 2008, another part of the Virgin group, Virgin Comics underwent a management buyout and changed its name to Liquid Comics.
On September 24, 2008, it was announced that Virgin Comics was renamed Liquid Comics after a management buyout.

Virgin Megastores

Virgin MegastoreVirginMegastore
On September 17, 2007, Richard Branson announced that the UK arm of Virgin Megastores was to be sold off as part of a management buyout, and from November 2007, will be known by a new name, Zavvi. In Australia, another group of music and entertainment stores were subject to a management buyout in September 2009, when Sanity's owner and founder, Brett Blundy, sold BB Retail Capital's Entertainment Division (including Sanity, and the Australian franchises of Virgin Entertainment and HMV) to the company's Head of Entertainment, Ray Itaoui.
A management buy-out offer was accepted.

Hitman (franchise)

HitmanHitman'' seriesHitman'' video game series
Hitman is a stealth video game series developed by the Danish company IO Interactive.
IO Interactive remained a subsidiary of Square Enix until 2017, when Square Enix started seeking sellers for the studio, IO Interactive completed a management buyout, regaining their independent status and retaining the rights for Hitman, in June 2017.

IO Interactive

Hitman is a stealth video game series developed by the Danish company IO Interactive.
IO Interactive performed a management buyout in June 2017, becoming independent and regaining the rights to their Hitman and Freedom Fighters franchises.

Envy ratio

Envy ratio
It is used to consider an opportunity for a management buyout.

Management buy-in

MBI
Management buy-in
A buy-in management buyout is a combination of a management buy-in and a management buyout.

Sanity (music store)

SanityBrett BlundySain
In Australia, another group of music and entertainment stores were subject to a management buyout in September 2009, when Sanity's owner and founder, Brett Blundy, sold BB Retail Capital's Entertainment Division (including Sanity, and the Australian franchises of Virgin Entertainment and HMV) to the company's Head of Entertainment, Ray Itaoui.
In September 2009, CEO, Brett Blundy sold the Entertainment Division of BB Retail Capital - which included the remaining 238 Sanity/Virgin/HMV store network - to BBRC's Head of Entertainment, Ray Itaoui, in a management buy-out.

Venture capital

venture capitalistventure capitalistsventure capital firm
The venture capital industry has played a crucial role in the development of buyouts in Europe, especially in smaller deals in the UK, the Netherlands, and France.

Due diligence

due caredue diligence auditdue-diligence
In particular, the due diligence process is likely to be limited as the buyers already have full knowledge of the company available to them.

Warranty

warrantiesbreach of warrantylifetime warranty
The seller is also unlikely to give any but the most basic warranties to the management, on the basis that the management know more about the company than the sellers do and therefore the sellers should not have to warrant the state of the company.

Information asymmetry

information asymmetriesasymmetric informationimbalances in information
Some concerns about management buyouts are that the asymmetric information

Principal–agent problem

agency theoryprincipal-agent problemprincipal-agent
The impending possibility of an MBO may lead to principal–agent problems, moral hazard, and perhaps even the subtle downward manipulation of the stock price prior to sale via adverse information disclosure, including accelerated and aggressive loss recognition, public launching of questionable projects, and adverse earning surprises.

Moral hazard

demoralizing effectbreakdown in accountabilityincentive for responsibility
The impending possibility of an MBO may lead to principal–agent problems, moral hazard, and perhaps even the subtle downward manipulation of the stock price prior to sale via adverse information disclosure, including accelerated and aggressive loss recognition, public launching of questionable projects, and adverse earning surprises.

Corporate governance

governancecompliance and governanceCorporate Communications
Naturally, such corporate governance concerns also exist whenever current senior management is able to benefit personally from the sale of their company or its assets.

Insider trading

inside informationinsider informationinsider dealing
Since corporate valuation is often subject to considerable uncertainty and ambiguity, and since it can be heavily influenced by asymmetric or inside information, some question the validity of MBOs and consider them to potentially represent a form of insider trading.

Perverse incentive

incentiveperverse incentives
The mere possibility of an MBO or a substantial parting bonus on sale may create perverse incentives that can reduce the efficiency of a wide range of firms—even if they remain as public companies.

Externality

externalitiesnegative externalitiesnegative externality
This represents a substantial potential negative externality.

Money

monetaryspeciecash
The management of a company will not usually have the money available to buy the company outright themselves.

Bank

bankerbankingbanking system
They would first seek to borrow from a bank, provided the bank was willing to accept the risk.

Financial risk

riskinvestment riskfinancial
They would first seek to borrow from a bank, provided the bank was willing to accept the risk.

Cash flow

cash flowscashflowcash-flow
Companies that proactively shop aggressive funding sources should qualify for total debt financing of at least four times (4X) cash flow.

Private equity

private-equityequityPrivate equity investor
If a bank is unwilling to lend, the management will commonly look to private equity investors to fund the majority of buyout.

Share (finance)

sharessharestock
The private equity investors will invest money in return for a proportion of the shares in the company, though they may also grant a loan to the management.