A management buyout (MBO) is a form of acquisition where a company's existing managers acquire a large part or all of the company from either the parent company or from the private owners. Common practice is to have the management team fund the buy‑out with a portion of their own capital in order to ensure they are actively incentivized to grow the company. The amount management is required to invest is typically material enough to ensure their ongoing commitment to the success of the business.
When setting up a company,it is easy to assume that nothing can go wrong in the future. You might assume that as you trust one another you do not need to put in place something like a shareholders’ agreement – you might think that asking for a shareholders’ agreement will make it sound like you do not trust or respect your new business partners. However, if the worst should happen, you could then end up with nothing. Or you might face a costly and acrimonious legal dispute related to the business.
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