A management buy-out (MBO) is the acquisition of a business by its existing management.
If the owners (the existing shareholders) of a business want to sell, the existing management are often the people in the best position buy them out take the business forward. They know the business and are therefore in a strong position both to value it (to decide if it is worth buying) and subsequently run it. One may also take the view that they will work harder for themselves than for other people.
MBOs are often carried out by a consortium of the current management and external backers. MBOs generally require more capital than a start-up and often are financed by venture capital or private equity firms.
If a business is under-performing due to bad management, a management buy-in may be preferable. This is the purchase of a business by new shareholders who include new management.