Management buyout
0Management buyout, by Wikipedia https://en.wikipedia.org/wiki?curid=1001919 / CC BY SA 3.0
#Corporate_finance
#Management
#Private_equity
A management buyout （MBO） is a form of acquisition in which a company's existing managers acquire a large part, or all, of the company, whether from a parent company or non-artificial person（s）.
Management-, and/or leveraged buyout became noted phenomena of 1980s business economics.
These so-called MBOs originated in the US, spreading first to the UK and then throughout the rest of Europe.
The venture capital industry has played a crucial role in the development of buyouts in Europe, especially in smaller deals in the UK, the Netherlands, and France.
Management buyouts are similar in all major legal aspects to any other acquisition of a company.
The particular nature of the MBO lies in the position of the buyers as managers of the company and the practical consequences that follow from that.
In particular, the due diligence process is likely to be limited as the buyers already have full knowledge of the company available to them.
The seller is also unlikely to give any but the most basic warranties to the management, on the basis that the management know more about the company than the sellers do and therefore the sellers should not have to warrant the state of the company.
Some concerns about management buyouts are that the asymmetric information possessed by management may offer them unfair advantage relative to current owners.
The impending possibility of an MBO may lead to principal–agent problems, moral hazard, and perhaps even the subtle downward manipulation of the stock price prior to sale via adverse information disclosure,
including accelerated and aggressive loss recognition, public launching of questionable projects, and adverse earning surprises.
These issues make recovery by shareholders who bring suit challenging the MBO more likely than challenges to other kinds of mergers and acquisitions.
Naturally, these corpor...
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