What Is a Management Buy-In?

Management buyout is a company's management to use high debt financing to buy out the company's equity, so that the company is privately owned, and then achieve the purpose of controlling and restructuring the company, and obtain extraordinary benefits of merger and acquisition transactions. It belongs to the category of leveraged buyout, but its main body is the management. Different from the general corporate trading and asset reorganization, which emphasizes the right to income, that is, the bid-ask spread and the appreciation of capital operations, in addition to the right to income, it also emphasizes the right to control, sharing and residual value claims. The acquisition object can be the entire enterprise, or a subsidiary, branch, or even a department of the enterprise. ^[1]

Management buyout

For a long time, some state-owned enterprises in China lacked efficiency.

1.MBO's

In recent years,

In the review of the source of the acquisition funds, the concerns of the acquisition funds from the financing arrangements include: whether the acquirer provides a loan agreement, and whether the acquisition, disposal, pledge and voting rights of the listed company's shares with the borrower or other third parties Special arrangements exist, whether to disclose the specific content of the arrangements; combined with the past financial information of the acquirer and the latest situation of business, assets, income, cash flow, pay attention to whether the acquirer has the ability to repay and the source of funds to repay the loan Acquisition strength and whether the relevant loan agreement is true and legal.

Concerns about the source of acquisition funds in management acquisitions include: concern about the dividend policy of listed companies and the remuneration of senior management personnel; whether the listed company and its affiliates have worked with management and their close relatives and their positions in the past two years. The company has funds and business dealings, whether there is any occupation of funds, guarantees, and other listed companies' transmission of benefits to management.

Sources of acquisition funds for acquisitions of natural persons or shell companies controlled by natural persons include: whether the listed company and its related parties have any funds or business transactions with the acquirer and its close relatives and its related parties in the past two years, and whether there is any capital occupation , Guarantees and other listed companies' transfer of interests to the acquirer; whether the acquirer has the acquisition strength; whether the true identity of the acquirer is fully disclosed, whether it has a continuous record of integrity, and whether there are acquisitions on behalf of others. ^[3]

From the above analysis, it can be seen from the analysis of the purpose of the behavior: the purpose of the acquisition and merger of the listed company is mainly to grasp the control of the target company, and the management acquisition is mainly to reorganize the property right or improve efficiency; See, listed company acquisitions and company mergers can be anyone, while management buyouts are limited to the company's management; from the perspective of behavior, listed company acquisitions must go through the securities market, and company mergers and management buyouts usually go through negotiation From the source of funds, listed company acquisitions and corporate mergers must be the actor's own funds, while management acquisitions rely on leveraged financing. ^[2]