Management buy-out (MBO)
If an internal family solution is not available, the existing employees are the next logical option (MBO). They know the company and the owner knows them.
The key to success lies in early planning and ensuring that the management team has the necessary skills and financing for the purchase. In addition, it is important to carry out a fair valuation of the business to provide a solid basis for the purchase price. This can be supported by the involvement of external advisors who can provide an objective assessment of the company's value and risks.
Furthermore, the future strategic goals should be clearly defined to ensure the company's alignment with the MBO. The careful preparation of a detailed business plan that reflects both the short and long-term visions of the management is essential to the success of the MBO.
FAQ - Management Buy-Out
A management buy-out is a company takeover in which the previous management acquires the company. Management buy-outs are primarily used in the context of corporate restructuring or to resolve a succession situation.
A management buy-out is an option for small and medium-sized enterprises (SMEs) that are to be sold. This can take the form of a takeover of an entire company or part of a company.
In a management buy-out, the active management of the company buys all or part of the company.
If only a part is acquired, the acquired parts are spun off and a new company is founded. In this way, for example, only a single division can be acquired. In this way, a new company can be created and the old one can continue to exist.
A management buy-out often occurs when an owner-managed company is unable to find a successor (e.g. in a family business).
A management buy-out is often a sensible solution for company succession. For example, if the company is not to be sold to a competitor or other investors.
A management buy-out offers continuity and can often be handled more quickly and smoothly than other succession solutions.
The aim of a management buy-out is to ensure that a company can continue to be run by active management. This increases the chances of success, as the previous managers know the company well.
- With a management buy-out, the previous owners benefit from knowing that their company is in good hands even after their departure.
- For the buyers, the management buy-out has the advantage that they already know the company with all its strengths and weaknesses.
- The existing customer base and all business contacts are retained.
- In many cases, it is easier to continue an existing company than to set up a new company that does not yet have a name in the industry.
- A management buy-out is generally less profitable for sellers than a sale to a competitor. This is because the management knows all the strengths and, above all, weaknesses of the company.
- A disadvantage for existing managers may be that they do not feel comfortable in their role as future company leaders. Not all managers are automatically suitable for managing a company. Sometimes they lack the entrepreneurial spirit and strategic skills to break down visions into actionable goals.
- Another major disadvantage is that a management buy-out requires a lot of capital, which is rarely available as equity.
A distinction is made between different types of management buy-outs
- Leveraged management buy-out: Here the money for the purchase comes mainly from third parties, the equity share is small.
- Privatization- Management Buy-Out or Going Private Management Buy-Out: This is the term used when a management buy-out is carried out for a listed stock corporation, i.e. the stock corporation is reprivatized.
- Another form of company takeover by management is the management buy-in (MBI). In this case, a company is taken over by an external management team or the takeover is accelerated by an external management team with the help of an investor.
- If all or a large part of the workforce takes over the company shares, this is referred to as an employee buy-out.
- If the new majority shareholder of a company is an institutional investor, this transfer of ownership is called an institutional buy-out. Institutional buy-out.