medium · Private Equity pe-core
A private equity firm is evaluating a potential 'Management Buyout' (MBO).
What is the primary risk associated with an MBO compared to a standard secondary buyout?
- Conflict of interest where management may favor the buyer over current shareholders
- An inability to employ meaningful leverage given management's limited personal capital base
- Elevated integration risk that typically follows the closing of the transaction
- Persistent information asymmetry that exists between management and the sponsor
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