Asked on 19 Oct 2019
And how does it affect companies?
Great answers by Alvin and Junus!
Adding a personal observation:
Companies that undergone MBO tends to outperform. With greater skin-in-the-game, comes alignment. Not always, but likely!
Definition: A management buyout (MBO) is a transaction where a company’s management team purchases the assets and operations of the business they manage.
How it affects companies: MBOs are potentially appealing to professional managers because of the greater potential rewards and control from being owners of the business rather than employees.
Imagine a Chef who started a restaurant with a sleeper partner just to fund business. Over the years, if the chef has saved up quite a bit, he may be keen to buy out the partner’s share to keep running the business.
If buyouts are from management, usually the intention is to further the business, read the reports they put out and determine if it’s good for you.