MBO is an acronym for management buyout, or a leveraged buyout conducted by a company's existing management. In most cases, the management will then take the company private. MBO's have assumed an important role in the corporate restructurings besides mergers and acquisitions. The key considerations are the fairness to shareholders, the price, the future business plan, and legal and tax issues.
The principle behind MBO is to make sure that everybody within the organization has a clear understanding of the aims, or objectives, of that organization, as well as awareness of their own roles and responsibilities in achieving those aims.
The complete MBO system is to get managers and empowered employees acting to implement and achieve their plans, which automatically achieve those of the organization.
For MBO to be effective, individual managers must understand the specific objectives of their job and how those objectives fit in with the overall company objectives set by the board of directors.
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