Salient Features of a Management Buyout (MBO)

A management buyout (“MBO”) involves the purchase of an existing business by its senior management team. It has proved itself to be an attractive vehicle for management, who can accumulate wealth in the form of an equity participation in their company. This note looks at salient features of MBOs, such as how they are structured and financed, and how equity is allocated. It also examines how to evaluate an MBO candidate to guage whether it has potential for success.

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