Management buyouts

Management buyouts

A management buyout (often referred to as an ‘MBO’) involves the acquisition of a business by its existing management team, typically with the assistance of private equity-backed finance. The private equity investor receives a stake in the business (typically a majority stake) and the incumbent management remains in place post-acquisition.

MBOs are among the most commonly encountered private equity-backed transactions as they are seen as a relatively low-risk option for investors. This is because the business concerned will already be well-established and the managers running it will know the business and the market it operates in very well. For a more detailed discussion about what MBOs are, see Practice Note: Tax and management buyouts—what is a management buyout?

A number of tax issues arise for each of the parties involved in an MBO. This subtopic deals with the UK tax implications for a UK management team and UK acquisition group involved in an MBO transaction.

For the tax issues arising when a private equity acquisition has offshore elements, see Practice Note: Tax and private equity—international acquisitions.

Structure and financing

The precise structure of an MBO will vary

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