Management buy-in (MBI)

A management buy-in (MBI) is the purchase of a business by a new management team, usually with private equity funding. Unlike a management buy-out (MBO), there is a complete change of management. Whether this is a good or bad thing depends on the business. The advantages of a MBI are:

  • A wider choice of buyers means the business can be sold for a better price — a possible MBO may deter other potential buyers.
  • The change may be desirable if the business is not currently well managed.
  • The new management team may be better placed (contacts, reputation, etc.) to find backing.

The disadvantages are:

  • The new management team do not know the business.
  • They are regarded as riskier, so can be harder to get backing for.
  • The existing management are likely to be demotivated in the meantime.

A compromise between a MBI and a MBO, combining some of the advantages of each, may be achieved by a buy-in management buy-out (BIMBO), which combines new and old management.

Copyright Graeme Pietersz © 2005-2020