Börsenlexikon: Management Buy-out

he term management buy-out (MBO) refers to a company takeover in which the management acquires the majority of the capital from the previous owners. If the employees take over the company, this is called an employee buy-out. This can involve, for example, companies that are economically ailing and whose previous owners no longer want to finance the company. In this case, one speaks of a restructuring MBO. If the financing is mainly provided by outside capital, one can also speak of a leveraged management buy-out. As a rule, MBOs are only financed to a fraction with the private assets of the management; a large part of the financing is provided by financial investors (for the equity portion of the investment) and banks (for the debt portion). In the case of an MBO, the principal-agent conflict is more or less resolved, since after an MBO there is a greater unity of management and ownership. The MBO has proved particularly successful in the case of corporate successions. In the MBO of a listed corporation, it is common to re-privatize the corporation, in which case it is referred to as a privatization MBO. This gives the management the opportunity to develop the company independently of the constraints of the stock market. In case of lack of heirs, old owners often prefer to hand over their company to people they have known for many years. As a result, the former owners often offer their company for sale to their own managers, as they both trust them and can judge their commercial skills. Another advantage is that one does not have to submit all the company documents for inspection by outside buyers, for example competitors, and run the risk of disclosing confidential information. A potential risk, on the other hand, is the management's information advantage, which can lead to the sellers being taken advantage of by the management. In cases of economic distress, it is usually the case that the employed management can assess the situation of the company much better than external investors or restructurers. Therefore, in these cases, they are usually more willing to restructure the company and subsequently continue it.