The anatomy of a management buy-out

Dissecting the opportunities and obstacles of a private company buy-out.

Management buy-outs—and in particular those funded by private equity—are no longer rare occurrences.  Thanks to robust M&A activity in North America—up 5.1% in 2014—as well as the open credit markets, private equity funds have been able to use higher debt levels to fund acquisitions, particularly management buy-outs.  In fact, PE funds and lenders have become more receptive to helping strong management teams take over the reins of successful organizations.

When done right, a management buy-out can provide liquidity to an existing shareholder/vendor while allowing management to take an ownership stake in the business, resulting in a win-win for everyone and ensuring the future success of the business.

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