MBO and MBI

A Management Buy-Out ("MBO") is when a business is sold to the existing management team.
An MBO usually occurs when:

• companies sell parts of the business that are not core to their future strategy
• the existing owner-manager is looking to retire

The existing management usually have inside knowledge of the business they are in and are therefore in the best position to take the business forward. Often this is the preferred option to the existing owner, rather than selling to a competitor.

An MBO offers ambitious managers an opportunity to run their own business and benefit from their own efforts through increased remuneration and a valuable asset to sell on in the future. An MBO requires careful planning to ensure a smooth take over. Management Buy-Out strategies can be very complex and often requires specialist funding.

A Management Buy-In ("MBI") is when a business is sold to an outside management team.
An MBI usually occurs when:

• the business is underperforming and would benefit from additional management input
• the MBI team have specific knowledge and can move the business forward

MBI's are traditionally more difficult to fund than MBO's. The lenders have to be convinced that the MBI team (or MBI candidate) have a sufficient experience and the ability to deliver. Again, careful planning is required.