Management Buyout (MBO)
Private Equity glossary · Private Equity Fundamentals
Definition
Acquisition in which existing management buys the company, typically with PE sponsor.
Management Buyout (MBO) in plain English
A Management Buyout (MBO) is when the people who already run a company — the CEO and their team — buy the company they work at and become its owners. Because managers rarely have enough personal cash to buy a whole business, they usually team up with a private equity firm (the 'sponsor') that puts up most of the money, so the managers get a real ownership stake while the PE firm funds the deal. Imagine the crew running a popular restaurant deciding to buy it from the founder, with a wealthy backer covering the check in exchange for most of the ownership. The appeal is alignment: the people making daily decisions now personally win or lose based on how well the company does.
Also called: MBO
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