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Is a management buyout (MBO) better than a management buyin (MBI)?

Is a management buyout (MBO) better than a management buyin (MBI)?

There are many differences between an MBO and an MBI. The key differences are as follows:

  • An MBO involves existing team members with extensive knowledge of day to day operations
  • An MBO is seen by funders as less risky
  • An MBO might be more likely to get the support of the existing owner
  • An MBO might have a greater chance of retaining the existing owner in an equity capacity
  • Existing management not comfortable in stepping up to drive the business
  • Existing management risk averse and don’t wish to invest
  • Existing management wish to invest but don’t have the money
  • Existing management not sufficiently experienced to be backable by a funder
  • An MBI will typically give the buyer/investor a larger slice of equity
  • An MBI is inherently more difficult to undertake