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ACCA Strategic Professional · Advanced Financial Management · Business re-organisation

Which feature most clearly distinguishes a management buy-out (MBO) from a management buy-in (MBI)?

In a management buy-out the existing management team acquires the business it already runs, while in a management buy-in an external management team comes in and buys it. Funding structure and listing status do not define the difference.

  1. AIn an MBO the existing management team acquires the business, whereas in an MBI an external management team doesCorrect
  2. BAn MBO is always funded entirely by equity, whereas an MBI is funded entirely by debt
  3. CAn MBO involves distributing shares to existing shareholders, whereas an MBI involves a public offer
  4. DAn MBO can only occur for a listed company, whereas an MBI can only occur for an unlisted company

Explanation

The difference lies in who buys: current managers in an MBO, outside managers in an MBI. Funding mix and listing status are not defining features, and distributing shares to existing holders describes a spin-off.

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