Management Transfers

The term “management transfer” refers to two different situations: Management buyout (MBO) that occurs when an existing management team purchases all or part of the company in which they are employed and Management buy‐in (MBI) that occurs when a management team buys all or part of a business in which it is not currently involved. Successful management transfers rely on the valuation and capital structure formation areas of the triangular body of knowledge. Management transfers generally occurs under three different circumstances: (1) Corporate divestitures (2) Private owner, and (3) Failed business. This chapter explores into the management transfers in corporate divestitures and buyouts from private owners. The ability to transfer a business interest is conditioned by its access to capital and the value world in which the transfer takes place. No other transfer method has as many capital options and possible value world combinations as management transfers. This variety of alternatives causes these transfers to be volatile and uncertain, yet potentially rewarding.