Management Buyout (MBO): Current managers acquire the company from existing owners. Often triggered by retirement or parent company disposal. It ensures continuity and is typically lower risk.
Management Buy-In (MBI): An outside manager or team purchases a controlling stake and replaces existing management. Occurs when a company is undervalued or needs new direction.
Both require significant capital, often a mix of debt (leveraged buyout), equity, and vendor loans. Legal documentation is crucial, including loan agreements and non-compete clauses.
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