Management and Employee Buyout (MEBO)

A management and employee buyout (MEBO) is a restructuring initiative that involves both managerial and non-managerial employees buying out a firm in order to concentrate ownership into a small group from a widely dispersed group of shareholders.

MEBOs are generally used to privatize a publicly traded company, but can also be used as an exit strategy for venture capitalists or other shareholders in an already private firm. MEBOs are often seen as a way to bring greater efficiency to a firm's production because they can provide added job security for employees – motivating them to give a stronger effort to improve company profitability.

MEBOs may be used by corporations who wish to pursue the sale of divisions that are not part of their core business, or by private businesses where the owners wish to retire. An internal team of management and employees will pool their resources to acquire a business they operate or manage. Funding often comes from a mix of personal savings and capital, seller financing or private equity financing.

This type of buyout is conducted by management and employee teams that want to more directly benefit from the growth and future direction of the company than they can do as employees-only. Although the potential to reap the rewards of ownership is significant, employees and managers must make the transition from being employees to owners, which requires more of an entrepreneurial mindset. This may not always be a smooth transition.