• A BIMBO is a leveraged buyout in which a new firm buys the company as well as the existing management team while simultaneously offering a stake to an external party.
  • Buy-In Managed Buy-out often occurs when both executives and outside investors or firm management want to buyout a company. 
  • The process streamlines the transition from one ownership to another and minimizes the risk of disruption during M&A activity.

Why Pursue an MBO?

A BIMBO facilitates greater alignment and teamwork between internal and external management, making it a great tool for private equity firms. The most attractive investment for a PE firm is a company with a strong and pressure-tested management team. 

A prime element of a BIMBO is that the core management team and the shareholders both take an equity stake in the business. These transactions most frequently occur when the owner is looking to retire or leave the business but hopes to provide the existing team an opportunity to further expand, invest, and grow within the company. Allowing a buyout of current capital incentivizes the team to stay with the company while signaling to outside investors that the company has enough stamina and cash flow to continue to be successful. 

Pursuing a buyout is attractive to owners for a plethora of reasons that may include: rewarding the core management team for continued commitment to the company; decreasing the risk of confidential information leaking to the public; expediting sale and minimizing the risk of not closing; keeping a dynamic team engaged where a third party sale may disrupt and displace key roles; and ensuring a well-educated buyer in a niche or complicated business or industry. 

When to Invest (and When to Leave) 

According to a piece by Deloitte, there are four key criteria for a successful management buy-out: an all-star management team, a strong cash flow and commercial success, the due diligence readiness of the company, and a PE investor on standby with the capabilities needed to support and fund the company. 

Unsurprisingly, the most important element of any BIMBO is the quality of the management team. As a PE investor, look for teams that are diversified in their areas of expertise and business and work together with aplomb. As part of the exis...