Background to the MBO Market

An MBO, by definition, is the purchase of a company by its management. Management would generally acquire a controlling or significant equity stake for a small personal investment. The remaining purchase price is financed by external parties providing debt and additional equity.

MBO’s first came to the UK market during the 1970’s, since then they have increased in popularity to become the most common form of acquisition today. The graph below demonstrates that MBO’s generate, on average, 50% of all merger and acquisition transactions.

It is a common misconception that only certain sectors fit the MBO model, in reality all types of business lend themselves to MBOs. The chart below illustrates the broad spectrum of industries that MBO transactions have occurred in over the last 5 years to 2008.