Babcock & Brown Member of the Heinrich & Mortinger Group of Companies
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Babcock & Brown Austria
Karlsgasse 14/8
1040 Vienna
T: +43 1 504 8872
F: +43 1 2081448

Management–Buy–Out (MBO)

Management–Buy–Out is a specific form of acquisition finance, in which the management acts as purchaser of a company. As the management typically does not have the necessary funds, third–party debt and equity is often required to cover a significant part of the purchase price. The seller may provide support for the financing through earn-out agreements or vendor notes.

MBO is often a unique opportunity for the management as well as the seller. Asides from the usual risks associated with an M&A transaction, there are a number of specific issues:

  • As a result of the need for a large percentage of debt funding, the enterprise has to satisfy specific requirements.

  • The Management has to negotiate 2 transactions. After it has identified and closed the deal with the investor the transaction process with the seller will start.

  • Is the MBO from the Management and not from the shareholder initiated, the Management should than first check if the financing of the deal will be possible at all.

  • The change from management to ownership requires, apart from several hard and soft skills, entrepreneurial competency and the appetite for risk.

  • Managers can become subject to significant conflicts of interest as they would like to pay a low purchase price, while on the other hand being obligated to negotiate a fair deal for their current employers, the existing owners.

 

Babcock & Brown provides support during the entire process    

 

As an independent advisor, we can help to avoid potential conflicts of interest between owners and management, or the buy-out team and its financial investors.