Management Buy-Out is the term applied when a business is sold to the existing management team. Often this occurs when large companies seek to dispose of parts of the business or when the existing owner-manager is looking to retire.
The existing management are often the people in the best position to take the business forward as they have expert knowledge of the company and its work-force. Strategically, they also present a more favourable option to the existing owner than selling to a competitor or closing the business down.
The main problem for the buy-out team will be securing the necessary finance. MBOs generally require more capital than a start-up or expansion scheme.