Management Buyouts – A Guide for Buyers

Mar 27, 2020

If you are part of a management team and are thinking about a management buyout (“MBO”) there are a lot of questions you may have. To help you when considering an MBO, we have answered some of these.

What exactly is an MBO?

An MBO is the process by which the management team of a company combine resources to purchase all or part of the shares in the company that they manage. A management team may make this decision for many reasons, such as the existing shareholders retiring or the company changing direction. Usually, the management team will join with a private equity fund or other investors to raise the funds for the MBO.

What is in it for me?

There are various reasons why as a manager you may want to buy out your company. As a shareholder in the company, you will benefit financially from any future growth of the company. You will also be an owner of the company and not just an employee. Being a shareholder almost always gives you the right to vote on important company matters and so you will have a level of control over the company.

How do we raise the funds?

It is rare that the management team will have sufficient funds on their own to buy the company, so will need to source external finance. Sources of funding can include:-

Management team contribution – the management team can invest funds and in return become a shareholder of the company.

Asset finance – loans can be taken out over the company’s assets, such as properties, to raise funds. 

Bank debt – banks can provide term loans.

Private equity – private equity funds can provide investment by purchasing shares in the company and providing loans to the company. Following the MBO, the private equity investor will work alongside the management team to develop and improve the business’ financial performance and operations.

How will the MBO work?

The simplest structure often used for an MBO is the creation of a new company (Newco) in which the management team will be shareholders. Newco will buy the shares in the target company (Seller). Often, the structure will be need to be more complex and you will need to take legal and tax advice on which structure is most appropriate for you.

A share purchase agreement will need to be negotiated between the management team, private equity investor and the Seller. Equally important is the preparation of a shareholders’ agreement which will regulate matters such as how the management team and private equity investors will work together and what happens if a shareholder leaves the business following the MBO.

How can we help?

We regularly advise both management teams and companies in relation to MBOs. For strategic legal advice on this matter, contact our expert corporate lawyers as soon as possible. Please contact Yavan Brar on 01189 899713, Matthew Lea on 01189 898155 or Chris Gemson on 01276 854669.

This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.















By Matthew Lea

Senior Solicitor, Corporate & Commercial Law  


Latest Articles & Legal Insights

Sign up

Enter your email address for legal updates on Private Client & Family Law.

Please see our privacy policy regarding use of your data.

Top read insights in 2019

Contract Law

Material Breach of Contract

What is a ‘material’ breach of contract by a party to a commercial contract? This is a critical issue regularly considered by the courts. What constitutes a material breach and what are the remedies?

Property Law

Purchasing Land – Option Agreements

A developer and a landowner can enter into an Option Agreement. What are the strategies that can be employed by both landowners and developers to assist in such land deals?

Divorce and Family Law

What are the Tax Implications of a Civil Partnership?

Is there a significant tax saving to be made by a couple who are married or in a civil partnership that cohabitating couples simply don’t qualify for?  

Land & Property Dispute

Restrictive Covenants – The Price of Modification

Having identified that your land is burdened by a restrictive covenant and for the purposes of this article the covenant in question will be that only one residential building can be erected on the land. What do you do next?

Wills, Trusts and Probate

Is my Will applicable to my Spanish property?

You must be careful when relying on an English Will in relation to your Spanish property.

Award winning legal advice

We are solicitors in Camberley, Wokingham and London. In 2019, Herrington Carmichael won ‘Property Law Firm of the Year’ at the Thames Valley Business Magazines Property Awards, ‘Best Medium Sized Business’ at the Surrey Heath Business Awards and we were named IR Global’s ‘Member of the Year’. We are ranked as a Leading Firm 2020 by Legal 500 and Alistair McArthur is ranked in Chambers 2020.


60 St Martins Lane, Covent Garden, London WC2N 4JS 

+44 (0) 203 755 0557



Building 2  Watchmoor Park, Riverside Way, Camberley, Surrey  GU15 3YL

+44 (0)1276 686 222


Wokingham (Appointment only)

4 The Courtyard, Denmark Street, Wokingham, Berkshire RG40 2AZ

+44 (0)118 977 4045


© 2021 Herrington Carmichael LLP. Registered in England and Wales company number OC322293.

Herrington Carmichael LLP is authorised and regulated by the Solicitors Regulation Authority.

Privacy Policy   |   Legal Notices, T&Cs, Complaints Resolution   |   Cookies

Client Feedback   |   Diversity Data