management buy-out


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Related to management buy-out: Leveraged Management Buyout, Management Buy In

Management Buyout

The act of the senior management of a publicly-traded company buying all of the company's shares outstanding. A management buyout gives the management complete control of the company and allows it to operate without recourse to shareholders. A management buyout is usually heavily leveraged and is a form of going private.

management buy-out (MBO)

the TAKEOVER of a firm, or of a division of a firm, by its existing management team from, in the former case, the shareholders of the firm, or in the latter case, the firm's main board of directors subject to shareholder approval. The purchase of a division of a diversified firm (see DIVERSIFICATION) by its management is a form of DIVESTMENT which can be beneficial to both parties. The disposer's motive is usually to get out of a particular activity which is no longer considered to fit in with its strategic plans for developing the business, and to use the monies released to strengthen its activities or acquire new businesses. From the buyer's point of view, there is the challenge of running one's own business and the potential for making a greater success of an activity which perhaps, because of insufficient support from above in its divisional form, had previously been underperforming. The rekindling of entrepreneurship in the hands of owner-managers is seen to be a key advantage of a management buy-out.

A critical factor in the success of a management buy-out, apart from the obvious need for managerial competence (and a little luck!) is the price paid for the business and the related financial package for acquiring it. The members of the management team will provide a percentage of the purchase price from their own personal funds and own a large amount of the SHARE CAPITAL, with the balance of funds often being provided by LOANS from merchant banks and venture capital specialists. Alternatively, the balance can be obtained by selling shares to the workforce either directly, or indirectly to a trust, as part of an EMPLOYEE SHARE OWNERSHIP PLAN. One advantage of this solution is that it enables the management team to avoid an overdependency on outside interests and unrealistic CAPITAL GEARING levels. See JUNK BOND, MANAGEMENT BUY-IN, DEMERGER, BUSINESS STRATEGY, VENTURE CAPITAL.

management buy-out

the purchase of a FIRM or division of a firm by its present management. In the former case, the shareholders of the firm may be prepared to accept management's financial terms of purchase because they are better than what an outside takeover bidder or merger partner is prepared to offer. In these cases, management buy-outs are often ‘defensively’ motivated, with the existing management fearing loss of office following a hostile takeover. The sale of a subsidiary or division of a firm to its incumbent management is often undertaken as a means of DIVESTMENT by the parent firm from a particular line of business rather than resulting from a takeover or merger approach. Again, in the interests of the shareholders of the firm, the financial details of such deals need to be carefully gone into. Management buy-outs are usually financed by outside interests, including VENTURE CAPITAL specialists and banks.
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References in periodicals archive ?
Burgis & Bullock Corporate Finance advises business owners, directors, and management teams on acquisitions, company sales, management buy-outs and buy-ins, and the raising of finance.
Management buy-outs are beginning to show the green shoots of recovery, according to new research by leading finance firms.
With the new rules however, where shares are acquired in the context of a management buy-out, in almost all cases they will potentially be within that part of the new provisions dealing with 'restricted securities'.
She supports corporate clients with raising finance, undertaking acquisitions, disposals, management buy-outs, business planning and strategic advice, having built up a wealth of experience across different sectors and a strong network of funders, lawyers and active corporate entities to execute such transactions.
Mr Williams joined Morgan Cole in 1998 and is a corporate lawyer with wide-ranging experience specialising in corporate transactions such as acquisitions and disposals, management buy-outs and buy-ins, corporate reorganisations, joint ventures and private equity transactions, as well as advising clients on an array of general company law matters including corporate governance, company formation and constitution and shareholder disputes.
Mr Donovan, who joined DWF in 2001, specialises in corporate law and corporate finance work including mergers and acquisitions, joint ventures, management buy-outs, private equity and group re-organisations.
While admitting that CAMRA could do very little to stop takeovers and mergers, Protz believes the main consideration is for breweries to remain in local hands - and points to management buy-outs and local cooperatives as the way to achieve it.
In corporate law he has advised clients in major acquisitions, sales, management buy-outs and buy-ins and public and private equity investments.
He joins from Deloitte & Touche Corporate Finance, and specialises in management buy-outs acquisitions and disposals of businesses, financial modelling and transaction services (including due diligence).
Alchemy is a venture capital company, registered in the Channel Islands and specialising in leveraged and management buy-outs and buy-ins.
The Company is owned by management and Cravey, Green & Wahlen (CGW), an Atlanta, Georgia based private equity firm specializing in management buy-outs of middle-market companies, with particular expertise in the packaging industry.
A spokesman said : "There is no truth in the rumour that NCB is for sale, or that there is any discussion about management buy-outs, management buy-ins or joint ventures or anything else.

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