Management Buyout (MBO)

MBO (Management Buyout) is the acquisition of a large part or all of the company by its own managers. This kind of acquisition is similar to any other acquisition in terms of major legal aspects. Management buyout may be done by managers for various purposes. The managers may do management buyout to save their jobs, to get the most financial benefits from the success that they have brought to the company by taking the profits for themselves, etc.

In management buyout, the due diligence process is likely to be limited. Because the buyers are the company's managers, they already know pretty much everything about the company. Those who are interested in studying more about MBOs might consider either an MBA or a masters in business intelligence from an accredited university. Management buyout may lead to moral hazard, principal-agent problems, and the possibility of subtle downward manipulation of the stock price before sale through adverse information disclosure.