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

Full Explanation

Management buyouts and management buy-ins are two routes to owner-managed acquisition, and the difference comes down to who the managers are.

In a management buyout, the team already running the business buys it, usually from a retiring owner or a parent group, typically backed by debt and sometimes private equity. Its great advantage is knowledge: the managers know the business, its customers and its risks intimately, so the intangible value is less likely to be lost in the handover.

In a management buy-in, an external team — often experienced executives who want to own and lead a business — buys it and takes over. The buyers bring fresh perspective and sector experience but do not know the specific business, so the intangible knowledge held by the departing owner and staff is at greater risk, which makes documented processes and a strong transition especially valuable. A hybrid, where an incoming leader joins existing managers, is called a buy-in management buyout, or BIMBO.

Both are common ways to buy an SME in the UK and both usually blend equity, bank debt and vendor finance. See the buy a business hub and the management buy-in and management buyout definitions.

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