What Is MBO?

MBO is the abbreviation of English ManagcmcntBuy-out, which means management buyout, mainly refers to the behavior of a company's manager using the loan capital or equity paction to acquire the company.

Through acquisition, the operator of an enterprise becomes the owner of an enterprise.

Management buyout has played a positive role in stimulating internal staff enthusiasm, reducing agency costs and improving the business status of enterprises, so it has become a popular way of business acquisition in the 70-80 world in the twentieth Century.

For Chinese enterprises, the greatest attraction of MBO lies in the ability to clarify the property rights of enterprises, realize the owners' return and establish the long-term incentive mechanism for enterprises. This is the most distinctive feature of China's MBO.

From the present point of view, the role of MBO in China is manifested in four aspects: first, to solve the problem of "absence of owners" in state-owned enterprises, and to promote the reform of the property rights system of state-owned enterprises; two, to solve the historical problems left by private enterprises with "red hat", to achieve the "return" of enterprises to the real owners, and to restore the real property of private enterprises, so as to remove property rights obstacles for the long-term development of private enterprises; three, to help state capital withdraw from non competitive industries; four, to encourage and constrain the management of enterprise operators, and to reduce agency costs.

This shows that MBO has been given high expectations, however, from the MBO practice at home and abroad, we can see that MBO is not suitable for all enterprises.

Enterprises implementing MBO must have at least three conditions. First, enterprises must have certain management efficiency space; secondly, enterprises are in highly competitive industries, such as home appliances and some highly developed high-tech enterprises; the third point is that enterprises should have excellent management team, which is also the key to success of MBO.