Management Buyout (MBO)

An acquisition in which a significant proportion of the purchase price is funded by debt, using the target company's assets and cash flows as collateral. LBOs are a common private equity strategy for acquiring mature, cash-generative businesses.

An equity-based compensation structure in private equity-backed companies that aligns management's financial interests with those of the PE sponsor by giving managers the opportunity to share in the equity upside upon exit. MIPs typically allocate 10-20% of the equity to management through sweet equity, share options, or ratchet mechanisms linked to achieving specified return hurdles.

An annual fee charged by a fund manager (general partner) to cover operational costs, typically calculated as 1.5% to 2.5% of committed capital during the investment period and assets under management thereafter. Management fees are separate from carried interest.

The sale of a company to a strategic buyer, typically another company in the same or adjacent industry. Trade sales are the most common exit route for venture-backed and private equity-backed businesses and often command premium valuations due to strategic synergies.

A business in which a private equity, venture capital, or growth equity fund has invested. Portfolio companies receive not only capital but also strategic support, operational guidance, and governance oversight from the fund, with the aim of accelerating value creation and achieving a profitable exit.

Business Asset Disposal Relief (BADR), formerly Entrepreneurs' Relief, is a UK capital gains tax relief that reduces the rate of CGT on qualifying gains when an individual sells all or part of a trading business. It applies a reduced CGT rate on gains up to a lifetime limit, provided conditions on ownership period, shareholding and officer or employee status are met in the period before disposal.

A management buy-in (MBI) is an acquisition in which an external management team, usually backed by finance, buys a business and takes over running it. It is the counterpart to a management buyout (MBO), where the existing management team buys the business it already runs; in a buy-in the incoming managers are new to the company.

Reverse due diligence is diligence a seller, or the management team of a target, carries out on the buyer. In any deal where the seller retains an ongoing interest — an earn-out, a rollover of equity into the enlarged group, or a management team joining a private-equity platform — the buyer's quality matters as much to the seller as the reverse.

What is a private equity fund and how do they use valuations?

PE funds buy companies at entry multiples, operate them to improve cash flows and competitive position, then exit at higher multiples — valuations are critical for entry/exit decisions.

Management buyout vs management buy-in — what's the difference?

In a management buyout (MBO) the existing team buys the business it already runs; in a management buy-in (MBI) an external team buys it and takes over running it.

What is Business Asset Disposal Relief?

Business Asset Disposal Relief (BADR), formerly Entrepreneurs' Relief, is a UK capital gains tax relief that reduces the CGT rate on qualifying gains when you sell a trading business, up to a lifetime limit, subject to conditions.

How do I find a buyer for my business?

Map your buyer universe of trade and financial buyers, then reach them confidentially through an adviser using an anonymous teaser and, under NDA, a fuller information memorandum, ideally running a competitive process.