Management Buy-out
What is Management Buy-out (MBO): In an ideal MBO , financial institutions or other fund lending institutions act like venture capitalist and support management of the company in buying out stakes from the promoter(s) of the company. This changes the control of the business. The entire business or a division may be bought out under an MBO deal on a going concern basis. The main ingredients behind the MBO are Company’s management creates and completes the deal Either sale of a division or sale of promoter’s stake Business is sold on going concern basis Control changes from the hands of promoter’s to management A third party, normally Financial Institution, backs up the management financially to buy out the controlling stake Rationale of MBO deal from existing promoter: The company intend to unlock the value of business by selling it which it considered as non-core Promoters are no longer interested in continuing the business or consider it a non-profitable and looking f...