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

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

TAKE A FREE TRIAL

Latest Tax News

Budget 2025—salary sacrifice reforms

Share Incentives analysis: Elissavet Grout is a partner in the Tax Department at Travers Smith LLP and heads the firm's Incentives and Remuneration group. Elissavet has extensive experience in advising on the design, implementation and tax treatment of remuneration arrangements for a wide range of UK and international clients. In this article, Elissavet considers the cap on National Insurance contributions (NICs) relief for pension contributions made as part of a salary sacrifice arrangement announced at Budget 2025. The Bill to give the Treasury the power to introduce the change with effect from April 2029 was introduced to Parliament on 4 December.

Finance Bill 2026—Tackling fraud in relation to the construction industry scheme

Tax analysis: The government is legislating in Finance Bill 2026 to implement new anti-fraud measures in the construction industry scheme (CIS). Ian Robotham, legal director in Pinsent Masons’ Contentious Tax team, analyses the measures and considers their practical consequences.

Budget 2025 and Finance Bill 2026—VAT treatment of private hire vehicle operators

Tax analysis: At Budget 2025, the government published the outcome to the 2024 consultation on the VAT treatment of private hire vehicle (PHV) operators, which included the announcement that it will legislate to exclude PHV and taxi operators from the tour operators’ margin scheme (TOMS) from 2 January 2026. Mark Rowbotham, Customs and VAT Consultant at Portcullis ISC, analyses the developments and considers their practical consequences.

Market value, distributions and notional transactions—key SDLT lessons from Tower One St George Wharf Ltd v HMRC

Tax analysis: In Tower One St George Wharf Ltd v HMRC, the Court of Appeal considered the basis on which stamp duty land tax (SDLT) should be assessed and whether that resulted in SDLT being paid on the market value, the actual consideration paid, or on some other basis for a complex transaction within a corporate group. The taxpayer argued that the ‘Case 3’ exception under section 54(4) of the Finance Act 2003 (FA 2003) applied, which would result in SDLT being charged on the actual consideration. HMRC argued that the exception did not apply, which would result in SDLT being paid on the market value of the property. Alternatively, HMRC argued that if the exception did apply then the anti-avoidance provisions at FA 2003, s 75A applied, potentially resulting in an even higher SDLT charge. The Court of Appeal held that although the Case 3 exception applied, the anti-avoidance provision in FA 2003, s 75A also applied. This resulted in SDLT being assessed on an aggregate amount that was even higher than the property's market value (although HMRC did not seek to increase its assessment beyond market value). Therefore, the appeal was dismissed. As explained by Jon Stevens, partner, and Rory Clarke, solicitor, at DWF Law LLP, this decision deals with the interaction of a number of complex SDLT provisions and clarifies the SDLT provisions relating to transfers to connected companies and the SDLT anti-avoidance provisions, with implications for corporate structuring and tax planning.