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class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Private_equity_financing"> <div class="vector-toc-text"> <span class="vector-toc-numb">3.2</span> <span>Private equity financing</span> </div> </a> <ul id="toc-Private_equity_financing-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Seller_financing" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Seller_financing"> <div class="vector-toc-text"> <span class="vector-toc-numb">3.3</span> <span>Seller financing</span> </div> </a> <ul id="toc-Seller_financing-sublist" class="vector-toc-list"> </ul> </li> </ul> </li> <li id="toc-Examples" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#Examples"> <div class="vector-toc-text"> <span class="vector-toc-numb">4</span> <span>Examples</span> </div> </a> <ul id="toc-Examples-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-See_also" 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<div class="mw-content-container"> <main id="content" class="mw-body"> <header class="mw-body-header vector-page-titlebar"> <nav aria-label="Contents" class="vector-toc-landmark"> <div id="vector-page-titlebar-toc" class="vector-dropdown vector-page-titlebar-toc vector-button-flush-left" > <input type="checkbox" id="vector-page-titlebar-toc-checkbox" role="button" aria-haspopup="true" data-event-name="ui.dropdown-vector-page-titlebar-toc" class="vector-dropdown-checkbox " aria-label="Toggle the table of contents" > <label id="vector-page-titlebar-toc-label" for="vector-page-titlebar-toc-checkbox" class="vector-dropdown-label cdx-button cdx-button--fake-button cdx-button--fake-button--enabled cdx-button--weight-quiet cdx-button--icon-only " aria-hidden="true" ><span class="vector-icon mw-ui-icon-listBullet mw-ui-icon-wikimedia-listBullet"></span> <span class="vector-dropdown-label-text">Toggle the table of contents</span> </label> <div class="vector-dropdown-content"> <div 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href="https://cs.wikipedia.org/wiki/Management_buyout" title="Management buyout – Czech" lang="cs" hreflang="cs" data-title="Management buyout" data-language-autonym="Čeština" data-language-local-name="Czech" class="interlanguage-link-target"><span>Čeština</span></a></li><li class="interlanguage-link interwiki-de mw-list-item"><a href="https://de.wikipedia.org/wiki/Management-Buy-out" title="Management-Buy-out – German" lang="de" hreflang="de" data-title="Management-Buy-out" data-language-autonym="Deutsch" data-language-local-name="German" class="interlanguage-link-target"><span>Deutsch</span></a></li><li class="interlanguage-link interwiki-es mw-list-item"><a href="https://es.wikipedia.org/wiki/Adquisici%C3%B3n_por_la_direcci%C3%B3n" title="Adquisición por la dirección – Spanish" lang="es" hreflang="es" data-title="Adquisición por la dirección" data-language-autonym="Español" data-language-local-name="Spanish" class="interlanguage-link-target"><span>Español</span></a></li><li class="interlanguage-link interwiki-fa mw-list-item"><a href="https://fa.wikipedia.org/wiki/%D8%AA%D9%85%D9%84%DA%A9_%D9%85%D8%AF%DB%8C%D8%B1%DB%8C%D8%AA" title="تملک مدیریت – Persian" lang="fa" hreflang="fa" data-title="تملک مدیریت" data-language-autonym="فارسی" data-language-local-name="Persian" class="interlanguage-link-target"><span>فارسی</span></a></li><li class="interlanguage-link interwiki-fr mw-list-item"><a href="https://fr.wikipedia.org/wiki/Rachat_de_l%27entreprise_par_les_cadres" title="Rachat de l'entreprise par les cadres – French" lang="fr" hreflang="fr" data-title="Rachat de l'entreprise par les cadres" data-language-autonym="Français" data-language-local-name="French" class="interlanguage-link-target"><span>Français</span></a></li><li class="interlanguage-link interwiki-ko mw-list-item"><a href="https://ko.wikipedia.org/wiki/%EA%B2%BD%EC%98%81%EC%9E%90%EB%A7%A4%EC%88%98" title="경영자매수 – Korean" lang="ko" hreflang="ko" data-title="경영자매수" data-language-autonym="한국어" data-language-local-name="Korean" class="interlanguage-link-target"><span>한국어</span></a></li><li class="interlanguage-link interwiki-it mw-list-item"><a href="https://it.wikipedia.org/wiki/Management_buyout" title="Management buyout – Italian" lang="it" hreflang="it" data-title="Management buyout" data-language-autonym="Italiano" data-language-local-name="Italian" class="interlanguage-link-target"><span>Italiano</span></a></li><li class="interlanguage-link interwiki-lt mw-list-item"><a href="https://lt.wikipedia.org/wiki/Vadovyb%C4%97s_vykdomas_i%C5%A1pirkimo_sandoris" title="Vadovybės vykdomas išpirkimo sandoris – Lithuanian" lang="lt" hreflang="lt" data-title="Vadovybės vykdomas išpirkimo sandoris" data-language-autonym="Lietuvių" data-language-local-name="Lithuanian" class="interlanguage-link-target"><span>Lietuvių</span></a></li><li class="interlanguage-link interwiki-nl mw-list-item"><a href="https://nl.wikipedia.org/wiki/Managementbuy-out" title="Managementbuy-out – Dutch" lang="nl" hreflang="nl" data-title="Managementbuy-out" data-language-autonym="Nederlands" data-language-local-name="Dutch" class="interlanguage-link-target"><span>Nederlands</span></a></li><li class="interlanguage-link interwiki-ja mw-list-item"><a href="https://ja.wikipedia.org/wiki/%E3%83%9E%E3%83%8D%E3%82%B8%E3%83%A1%E3%83%B3%E3%83%88%E3%83%BB%E3%83%90%E3%82%A4%E3%82%A2%E3%82%A6%E3%83%88" title="マネジメント・バイアウト – Japanese" lang="ja" hreflang="ja" data-title="マネジメント・バイアウト" data-language-autonym="日本語" data-language-local-name="Japanese" class="interlanguage-link-target"><span>日本語</span></a></li><li class="interlanguage-link interwiki-no mw-list-item"><a href="https://no.wikipedia.org/wiki/Ledelsesoppkj%C3%B8p" title="Ledelsesoppkjøp – Norwegian Bokmål" lang="nb" hreflang="nb" data-title="Ledelsesoppkjøp" data-language-autonym="Norsk bokmål" data-language-local-name="Norwegian Bokmål" class="interlanguage-link-target"><span>Norsk bokmål</span></a></li><li class="interlanguage-link interwiki-pl mw-list-item"><a href="https://pl.wikipedia.org/wiki/Wykup_mened%C5%BCerski" title="Wykup menedżerski – Polish" lang="pl" hreflang="pl" data-title="Wykup menedżerski" data-language-autonym="Polski" data-language-local-name="Polish" class="interlanguage-link-target"><span>Polski</span></a></li><li class="interlanguage-link interwiki-pt mw-list-item"><a href="https://pt.wikipedia.org/wiki/Opera%C3%A7%C3%A3o_de_compra" title="Operação de compra – Portuguese" lang="pt" hreflang="pt" data-title="Operação de compra" data-language-autonym="Português" data-language-local-name="Portuguese" class="interlanguage-link-target"><span>Português</span></a></li><li class="interlanguage-link interwiki-ru mw-list-item"><a href="https://ru.wikipedia.org/wiki/MBO" title="MBO – Russian" lang="ru" hreflang="ru" data-title="MBO" data-language-autonym="Русский" data-language-local-name="Russian" class="interlanguage-link-target"><span>Русский</span></a></li><li class="interlanguage-link interwiki-simple mw-list-item"><a href="https://simple.wikipedia.org/wiki/Management_buyout" title="Management buyout – Simple English" lang="en-simple" hreflang="en-simple" data-title="Management buyout" data-language-autonym="Simple English" data-language-local-name="Simple English" class="interlanguage-link-target"><span>Simple English</span></a></li><li class="interlanguage-link interwiki-sl mw-list-item"><a href="https://sl.wikipedia.org/wiki/Notranji_mened%C5%BEerski_odkup_podjetja" title="Notranji menedžerski odkup podjetja – Slovenian" lang="sl" hreflang="sl" data-title="Notranji menedžerski odkup podjetja" data-language-autonym="Slovenščina" data-language-local-name="Slovenian" class="interlanguage-link-target"><span>Slovenščina</span></a></li><li class="interlanguage-link interwiki-sr mw-list-item"><a href="https://sr.wikipedia.org/wiki/%D0%9C%D0%B5%D0%BD%D0%B0%D1%9F%D0%B5%D1%80%D1%81%D0%BA%D0%B8_%D0%BE%D1%82%D0%BA%D1%83%D0%BF" title="Менаџерски откуп – Serbian" lang="sr" hreflang="sr" data-title="Менаџерски откуп" data-language-autonym="Српски / srpski" data-language-local-name="Serbian" class="interlanguage-link-target"><span>Српски / srpski</span></a></li><li class="interlanguage-link interwiki-sh mw-list-item"><a href="https://sh.wikipedia.org/wiki/Menad%C5%BEerski_otkup" title="Menadžerski otkup – Serbo-Croatian" lang="sh" hreflang="sh" data-title="Menadžerski otkup" data-language-autonym="Srpskohrvatski / српскохрватски" data-language-local-name="Serbo-Croatian" class="interlanguage-link-target"><span>Srpskohrvatski / српскохрватски</span></a></li><li class="interlanguage-link interwiki-fi mw-list-item"><a href="https://fi.wikipedia.org/wiki/Management_buyout" title="Management buyout – Finnish" lang="fi" hreflang="fi" data-title="Management buyout" data-language-autonym="Suomi" data-language-local-name="Finnish" class="interlanguage-link-target"><span>Suomi</span></a></li><li class="interlanguage-link interwiki-sv mw-list-item"><a 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0.5em;text-align:center}.mw-parser-output .ambox .mbox-imageright{border:none;padding:2px 0.5em 2px 0;text-align:center}.mw-parser-output .ambox .mbox-empty-cell{border:none;padding:0;width:1px}.mw-parser-output .ambox .mbox-image-div{width:52px}@media(min-width:720px){.mw-parser-output .ambox{margin:0 10%}}@media print{body.ns-0 .mw-parser-output .ambox{display:none!important}}</style><table class="box-More_citations_needed plainlinks metadata ambox ambox-content ambox-Refimprove" role="presentation"><tbody><tr><td class="mbox-image"><div class="mbox-image-div"><span typeof="mw:File"><a href="/wiki/File:Question_book-new.svg" class="mw-file-description"><img alt="" src="//upload.wikimedia.org/wikipedia/en/thumb/9/99/Question_book-new.svg/50px-Question_book-new.svg.png" decoding="async" width="50" height="39" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/en/thumb/9/99/Question_book-new.svg/75px-Question_book-new.svg.png 1.5x, //upload.wikimedia.org/wikipedia/en/thumb/9/99/Question_book-new.svg/100px-Question_book-new.svg.png 2x" data-file-width="512" data-file-height="399" /></a></span></div></td><td class="mbox-text"><div class="mbox-text-span">This article <b>needs additional citations for <a href="/wiki/Wikipedia:Verifiability" title="Wikipedia:Verifiability">verification</a></b>.<span class="hide-when-compact"> Please help <a href="/wiki/Special:EditPage/Management_buyout" title="Special:EditPage/Management buyout">improve this article</a> by <a href="/wiki/Help:Referencing_for_beginners" title="Help:Referencing for beginners">adding citations to reliable sources</a>. Unsourced material may be challenged and removed.<br /><small><span class="plainlinks"><i>Find sources:</i> <a rel="nofollow" class="external text" href="https://www.google.com/search?as_eq=wikipedia&q=%22Management+buyout%22">"Management buyout"</a> – <a rel="nofollow" class="external text" href="https://www.google.com/search?tbm=nws&q=%22Management+buyout%22+-wikipedia&tbs=ar:1">news</a> <b>·</b> <a rel="nofollow" class="external text" href="https://www.google.com/search?&q=%22Management+buyout%22&tbs=bkt:s&tbm=bks">newspapers</a> <b>·</b> <a rel="nofollow" class="external text" href="https://www.google.com/search?tbs=bks:1&q=%22Management+buyout%22+-wikipedia">books</a> <b>·</b> <a rel="nofollow" class="external text" href="https://scholar.google.com/scholar?q=%22Management+buyout%22">scholar</a> <b>·</b> <a rel="nofollow" class="external text" href="https://www.jstor.org/action/doBasicSearch?Query=%22Management+buyout%22&acc=on&wc=on">JSTOR</a></span></small></span> <span class="date-container"><i>(<span class="date">October 2011</span>)</i></span><span class="hide-when-compact"><i> (<small><a href="/wiki/Help:Maintenance_template_removal" title="Help:Maintenance template removal">Learn how and when to remove this message</a></small>)</i></span></div></td></tr></tbody></table> <p>A <b>management buyout</b> (<b>MBO</b>) is a form of acquisition in which a company's existing managers acquire a large part, or all, of the company, whether from a <a href="/wiki/Parent_company" class="mw-redirect" title="Parent company">parent company</a> or <a href="/wiki/High-net-worth_individual" title="High-net-worth individual">individual</a>. <a href="/wiki/Management" title="Management">Management</a>- and/or <a href="/wiki/Leveraged_buyout" title="Leveraged buyout">leveraged buyouts</a> became noted phenomena of 1980s business economics. These so-called MBOs originated in the US, spreading first to the UK and then throughout the rest of Europe. The <a href="/wiki/Venture_capital" title="Venture capital">venture capital</a> industry has played a crucial role in the development of buyouts in Europe, especially in smaller deals in the UK, the Netherlands, and France.<sup id="cite_ref-1" class="reference"><a href="#cite_note-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> </p> <meta property="mw:PageProp/toc" /> <div class="mw-heading mw-heading2"><h2 id="Overview">Overview</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Management_buyout&action=edit&section=1" title="Edit section: Overview"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Management buyouts are similar in all major legal aspects to any other acquisition of a company. The particular nature of the MBO lies in the position of the buyers as managers of the company and the practical consequences that follow from that. In particular, the <a href="/wiki/Due_diligence" title="Due diligence">due diligence</a> process is likely to be limited as the buyers already have full knowledge of the company available to them. The seller is also unlikely to give any but the most basic <a href="/wiki/Warranties" class="mw-redirect" title="Warranties">warranties</a> to the management, on the basis that the management know more about the company than the sellers do and therefore the sellers should not have to warrant the state of the company. </p><p>Some concerns about management buyouts are that the <a href="/wiki/Information_asymmetry" title="Information asymmetry">asymmetric information</a> possessed by management may offer them unfair advantage relative to current owners. The impending possibility of an MBO may lead to <a href="/wiki/Principal%E2%80%93agent_problem" title="Principal–agent problem">principal–agent problems</a>, <a href="/wiki/Moral_hazard" title="Moral hazard">moral hazard</a>, and perhaps even the subtle downward manipulation of the stock price prior to sale via adverse information disclosure, including accelerated and aggressive loss recognition, public launching of questionable projects, and adverse earning surprises. These issues make recovery by <a href="/wiki/Shareholder" title="Shareholder">shareholders</a> who bring suit challenging the MBO more likely than challenges to other kinds of <a href="/wiki/Mergers_and_acquisitions" title="Mergers and acquisitions">mergers and acquisitions</a>.<sup id="cite_ref-2" class="reference"><a href="#cite_note-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup> Naturally, these <a href="/wiki/Corporate_governance" title="Corporate governance">corporate governance</a> concerns also exist whenever current senior management is able to benefit personally from the sale of their company or its assets. This would include, for example, large parting bonuses for CEOs after a takeover or management buyout. </p><p>Since corporate valuation is often subject to considerable uncertainty and ambiguity, and since it can be heavily influenced by asymmetric or inside information, some question the validity of MBOs and consider them to potentially represent a form of <a href="/wiki/Insider_trading" title="Insider trading">insider trading</a>. </p><p>The mere possibility of an MBO or a substantial parting bonus on sale may create <a href="/wiki/Perverse_incentive" title="Perverse incentive">perverse incentives</a> that can reduce the efficiency of a wide range of firms—even if they remain as public companies. This represents a substantial potential <a href="/wiki/Negative_externality" class="mw-redirect" title="Negative externality">negative externality</a>. The managers of the target company may at times also set up a holding company for the purpose of purchasing the shares of the target company. </p> <div class="mw-heading mw-heading2"><h2 id="Purpose">Purpose</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Management_buyout&action=edit&section=2" title="Edit section: Purpose"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1251242444"><table class="box-Unreferenced_section plainlinks metadata ambox ambox-content ambox-Unreferenced" role="presentation"><tbody><tr><td class="mbox-image"><div class="mbox-image-div"><span typeof="mw:File"><a href="/wiki/File:Question_book-new.svg" class="mw-file-description"><img alt="" src="//upload.wikimedia.org/wikipedia/en/thumb/9/99/Question_book-new.svg/50px-Question_book-new.svg.png" decoding="async" width="50" height="39" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/en/thumb/9/99/Question_book-new.svg/75px-Question_book-new.svg.png 1.5x, //upload.wikimedia.org/wikipedia/en/thumb/9/99/Question_book-new.svg/100px-Question_book-new.svg.png 2x" data-file-width="512" data-file-height="399" /></a></span></div></td><td class="mbox-text"><div class="mbox-text-span">This section <b>does not <a href="/wiki/Wikipedia:Citing_sources" title="Wikipedia:Citing sources">cite</a> any <a href="/wiki/Wikipedia:Verifiability" title="Wikipedia:Verifiability">sources</a></b>.<span class="hide-when-compact"> Please help <a href="/wiki/Special:EditPage/Management_buyout" title="Special:EditPage/Management buyout">improve this section</a> by <a href="/wiki/Help:Referencing_for_beginners" title="Help:Referencing for beginners">adding citations to reliable sources</a>. Unsourced material may be challenged and <a href="/wiki/Wikipedia:Verifiability#Burden_of_evidence" title="Wikipedia:Verifiability">removed</a>.</span> <span class="date-container"><i>(<span class="date">January 2023</span>)</i></span><span class="hide-when-compact"><i> (<small><a href="/wiki/Help:Maintenance_template_removal" title="Help:Maintenance template removal">Learn how and when to remove this message</a></small>)</i></span></div></td></tr></tbody></table> <p>Management buyouts are conducted by management teams as they want to get the financial reward for the future development of the company more directly than they would do as employees only. A management buyout can also be attractive for the seller as they can be assured that the future stand-alone company will have a dedicated management team thus providing a substantial downside protection against failure and hence negative press.<sup class="noprint Inline-Template" style="margin-left:0.1em; white-space:nowrap;">[<i><a href="/wiki/Wikipedia:Please_clarify" title="Wikipedia:Please clarify"><span title="The text near this tag may need clarification or removal of jargon. (October 2016)">clarification needed</span></a></i>]</sup> Additionally, in the case the management buyout is supported by a private equity fund (see below), the private equity will, given that there is a dedicated management team in place, likely pay an attractive price for the asset. </p> <div class="mw-heading mw-heading2"><h2 id="Financing">Financing</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Management_buyout&action=edit&section=3" title="Edit section: Financing"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1251242444"><table class="box-Unreferenced_section plainlinks metadata ambox ambox-content ambox-Unreferenced" role="presentation"><tbody><tr><td class="mbox-image"><div class="mbox-image-div"><span typeof="mw:File"><a href="/wiki/File:Question_book-new.svg" class="mw-file-description"><img alt="" src="//upload.wikimedia.org/wikipedia/en/thumb/9/99/Question_book-new.svg/50px-Question_book-new.svg.png" decoding="async" width="50" height="39" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/en/thumb/9/99/Question_book-new.svg/75px-Question_book-new.svg.png 1.5x, //upload.wikimedia.org/wikipedia/en/thumb/9/99/Question_book-new.svg/100px-Question_book-new.svg.png 2x" data-file-width="512" data-file-height="399" /></a></span></div></td><td class="mbox-text"><div class="mbox-text-span">This section <b>does not <a href="/wiki/Wikipedia:Citing_sources" title="Wikipedia:Citing sources">cite</a> any <a href="/wiki/Wikipedia:Verifiability" title="Wikipedia:Verifiability">sources</a></b>.<span class="hide-when-compact"> Please help <a href="/wiki/Special:EditPage/Management_buyout" title="Special:EditPage/Management buyout">improve this section</a> by <a href="/wiki/Help:Referencing_for_beginners" title="Help:Referencing for beginners">adding citations to reliable sources</a>. Unsourced material may be challenged and <a href="/wiki/Wikipedia:Verifiability#Burden_of_evidence" title="Wikipedia:Verifiability">removed</a>.</span> <span class="date-container"><i>(<span class="date">January 2023</span>)</i></span><span class="hide-when-compact"><i> (<small><a href="/wiki/Help:Maintenance_template_removal" title="Help:Maintenance template removal">Learn how and when to remove this message</a></small>)</i></span></div></td></tr></tbody></table> <div class="mw-heading mw-heading3"><h3 id="Debt_financing">Debt financing</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Management_buyout&action=edit&section=4" title="Edit section: Debt financing"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>The management of a company will not usually have the <a href="/wiki/Money" title="Money">money</a> available to buy the company outright themselves. They would first seek to borrow from a <a href="/wiki/Bank" title="Bank">bank</a>, provided the bank was willing to accept the <a href="/wiki/Financial_risk" title="Financial risk">risk</a>. Management buyouts are frequently seen as too risky for a bank to finance the purchase through a loan. Management teams are typically asked to invest an amount of capital that is significant to them personally, depending on the funding source/banks determination of the personal wealth of the management team. The bank then loans the company the remaining portion of the amount paid to the owner. Companies that proactively shop aggressive funding sources should qualify for total debt financing of at least four times (4×)<sup class="noprint Inline-Template Template-Fact" style="white-space:nowrap;">[<i><a href="/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed"><span title="Is 4x a general rule of thumb? Or would this vary according to industry?. (April 2017)">citation needed</span></a></i>]</sup> <a href="/wiki/Cash_flow" title="Cash flow">cash flow</a>. </p> <div class="mw-heading mw-heading3"><h3 id="Private_equity_financing">Private equity financing</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Management_buyout&action=edit&section=5" title="Edit section: Private equity financing"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>If a bank is unwilling to lend, the management will commonly look to <a href="/wiki/Private_equity" title="Private equity">private equity</a> investors to fund the majority of buyout. A high proportion of management buyouts are financed in this way. The private equity investors will invest money in return for a proportion of the <a href="/wiki/Shares" class="mw-redirect" title="Shares">shares</a> in the company, though they may also grant a <a href="/wiki/Loan" title="Loan">loan</a> to the management. The exact financial structuring will depend on the backer's desire to balance the risk with its return, with <a href="/wiki/Debt" title="Debt">debt</a> being less risky but less profitable than <a href="/wiki/Capital_(economics)" title="Capital (economics)">capital</a> investment. </p><p>Although the management may not have resources to buy the company, private equity houses will require that the managers each make as large an investment as they can afford in order to ensure that the management are locked in by an overwhelming vested interest in the success of the company. It is common for the management to re-mortgage their houses in order to acquire a small percentage of the company. </p><p>Private equity backers are likely to have somewhat different goals to the management. They generally aim to maximise their return and make an exit after 3–5 years while minimising <a href="/wiki/Risk" title="Risk">risk</a> to themselves, whereas the management rarely look beyond their careers at the company and will take a long-term view. </p><p>While certain aims do coincide—in particular the primary aim of <a href="/wiki/Profit_(accounting)" title="Profit (accounting)">profitability</a>—certain tensions can arise. The backers will invariably impose the same <a href="/wiki/Warranties" class="mw-redirect" title="Warranties">warranties</a> on the management in relation to the company that the sellers will have refused to give the management. This "warranty gap" means that the management will bear all the risk of any defects in the company that affect its value. </p><p>As a condition of their investment, the backers will also impose numerous <a href="/wiki/Contracts" class="mw-redirect" title="Contracts">terms</a> on the management concerning the way that the company is run. The purpose is to ensure that the management run the company in a way that will maximise the returns during the term of the backers' investment, whereas the management might have hoped to build the company for long-term gains. Though the two aims are not always incompatible, the management may feel restricted. </p><p>The European buyout market was worth €43.9bn in 2008, a 60% fall on the €108.2bn of deals in 2007. The last time the buyout market was at this level was in 2001 when it reached just €34bn.<sup id="cite_ref-3" class="reference"><a href="#cite_note-3"><span class="cite-bracket">[</span>3<span class="cite-bracket">]</span></a></sup> </p> <div class="mw-heading mw-heading3"><h3 id="Seller_financing">Seller financing</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Management_buyout&action=edit&section=6" title="Edit section: Seller financing"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>In certain circumstances, it may be possible for the management and the original owner of the company to agree a deal whereby the seller finances the buyout. The price paid at the time of sale will be nominal, with the real price being paid over the following years out of the profits of the company. The timescale for the payment is typically 3–7 years. </p><p>This represents a disadvantage for the selling party, which must wait to receive its money after it has lost control of the company. It is also dependent, if an earn-out is used, on the returned profits being increased significantly following the acquisition, in order for the deal to represent a gain to the seller in comparison to the situation pre-sale. This will usually only happen in very particular circumstances. The optimum structure would be to convert the earn-out to contracted deferred consideration which has compelling benefits for the seller as it legally fixes the total future amount paid to them. It's paid like a quarterly annuity, and then the seller needs to secure the annuity by taking out a deferred consideration surety guarantee from an independent surety institution. The direct beneficiary of the surety is the seller and should the sold firm become insolvent, following its sale, with any outstanding deferred payments due the seller, then the surety will pay the money to the vendor on the purchaser's behalf. </p><p>The vendor agrees to vendor financing for tax reasons, as the <a href="/wiki/Consideration" title="Consideration">consideration</a> will be classified as capital gain rather than as income. It may also receive some other benefit such as a higher overall purchase price than would be obtained by a normal purchase. </p><p>The advantage for the management is that they do not need to become involved with private equity or a bank and will be left in control of the company once the consideration has been paid. </p> <div class="mw-heading mw-heading2"><h2 id="Examples">Examples</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Management_buyout&action=edit&section=7" title="Edit section: Examples"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>A classic example of an MBO involved <a href="/wiki/Springfield_ReManufacturing" class="mw-redirect" title="Springfield ReManufacturing">Springfield Remanufacturing Corporation</a>, a former plant in <a href="/wiki/Springfield,_Missouri" title="Springfield, Missouri">Springfield, Missouri</a>, owned by <a href="/wiki/Navistar" class="mw-redirect" title="Navistar">Navistar</a> (at that time, <a href="/wiki/International_Harvester" title="International Harvester">International Harvester</a>) which was in danger of being closed or sold to outside parties until its managers purchased the company. <sup id="cite_ref-4" class="reference"><a href="#cite_note-4"><span class="cite-bracket">[</span>4<span class="cite-bracket">]</span></a></sup> </p><p>In the UK, <a href="/wiki/New_Look_(store)" class="mw-redirect" title="New Look (store)">New Look</a> was the subject of a management buyout in 2004 by <a href="/wiki/Tom_Singh" title="Tom Singh">Tom Singh</a>, the founder of the company who had floated it in 1998. He was backed by private equity houses <a href="/wiki/Apax" class="mw-redirect" title="Apax">Apax</a> and <a href="/wiki/Permira" title="Permira">Permira</a>, who now own 60% of the company. An earlier example of this in the UK was the management buyout of Virgin Interactive from <a href="/wiki/Viacom_(2005%E2%80%93present)" class="mw-redirect" title="Viacom (2005–present)">Viacom</a> which was led by Mark Dyne. </p><p>The <a href="/wiki/Virgin_Group" title="Virgin Group">Virgin Group</a> has undergone several management buyouts in recent years. On September 17, 2007, <a href="/wiki/Richard_Branson" title="Richard Branson">Richard Branson</a> announced that the UK arm of <a href="/wiki/Virgin_Megastores" title="Virgin Megastores">Virgin Megastores</a> was to be sold off as part of a management buyout, and from November 2007, will be known by a new name, <a href="/wiki/Zavvi_Entertainment_Group_Ltd" class="mw-redirect" title="Zavvi Entertainment Group Ltd">Zavvi</a>. On September 24, 2008, another part of the Virgin group, <a href="/wiki/Virgin_Comics" class="mw-redirect" title="Virgin Comics">Virgin Comics</a> underwent a management buyout and changed its name to <a href="/wiki/Liquid_Comics" title="Liquid Comics">Liquid Comics</a>. In the UK, <a href="/wiki/Virgin_Radio" title="Virgin Radio">Virgin Radio</a> also underwent a similar process and became <a href="/wiki/Absolute_Radio" title="Absolute Radio">Absolute Radio</a><i>.</i> </p><p>In Australia, another group of music and entertainment stores were subject to a management buyout in September 2009, when <a href="/wiki/Sanity_(music_store)" title="Sanity (music store)">Sanity</a>'s owner and founder, <a href="/wiki/Brett_Blundy" title="Brett Blundy">Brett Blundy</a>, sold <a href="/wiki/BB_Retail_Capital" class="mw-redirect" title="BB Retail Capital">BB Retail Capital</a>'s Entertainment Division (including Sanity, and the Australian franchises of <a href="/wiki/Virgin_Megastores" title="Virgin Megastores">Virgin Entertainment</a> and <a href="/wiki/HMV" title="HMV">HMV</a>) to the company's Head of Entertainment, Ray Itaoui. This was for an undisclosed sum, leaving <a href="/wiki/Sanity_Entertainment" class="mw-redirect" title="Sanity Entertainment">Sanity Entertainment</a> to become a private company in its own right.<sup id="cite_ref-5" class="reference"><a href="#cite_note-5"><span class="cite-bracket">[</span>5<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-6" class="reference"><a href="#cite_note-6"><span class="cite-bracket">[</span>6<span class="cite-bracket">]</span></a></sup> </p><p><i><a href="/wiki/Hitman_(franchise)" title="Hitman (franchise)">Hitman</a></i> is a <a href="/wiki/Stealth_game" title="Stealth game">stealth</a> video game series <a href="/wiki/Video_game_developer" title="Video game developer">developed</a> by the <a href="/wiki/Denmark" title="Denmark">Danish</a> company <a href="/wiki/IO_Interactive" title="IO Interactive">IO Interactive</a>, which was previously published by <a href="/wiki/Eidos_Interactive" title="Eidos Interactive">Eidos Interactive</a> and <a href="/wiki/Square_Enix" title="Square Enix">Square Enix</a>. IO Interactive remained a subsidiary of Square Enix until 2017, when Square Enix started seeking sellers for the studio, IO Interactive completed a management buyout, regaining their independent status and retaining the rights for <i>Hitman</i>, in June 2017.<sup id="cite_ref-7" class="reference"><a href="#cite_note-7"><span class="cite-bracket">[</span>7<span class="cite-bracket">]</span></a></sup> </p> <div class="mw-heading mw-heading2"><h2 id="See_also">See also</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Management_buyout&action=edit&section=8" title="Edit section: See also"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li><a href="/wiki/Takeover" title="Takeover">Takeover</a></li> <li><a href="/wiki/Management_buy-in" title="Management buy-in">Management buy-in</a></li> <li><a href="/wiki/Leveraged_buyout" title="Leveraged buyout">Leveraged buyout</a> - includes secondary buyout</li> <li><a href="/wiki/Envy_ratio" title="Envy ratio">Envy ratio</a></li> <li><a href="/wiki/Outline_of_organizational_theory" title="Outline of organizational theory">Outline of organizational theory</a></li></ul> <div class="mw-heading mw-heading2"><h2 id="References">References</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Management_buyout&action=edit&section=9" title="Edit section: References"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <style data-mw-deduplicate="TemplateStyles:r1239543626">.mw-parser-output .reflist{margin-bottom:0.5em;list-style-type:decimal}@media screen{.mw-parser-output .reflist{font-size:90%}}.mw-parser-output .reflist .references{font-size:100%;margin-bottom:0;list-style-type:inherit}.mw-parser-output .reflist-columns-2{column-width:30em}.mw-parser-output .reflist-columns-3{column-width:25em}.mw-parser-output .reflist-columns{margin-top:0.3em}.mw-parser-output .reflist-columns ol{margin-top:0}.mw-parser-output .reflist-columns li{page-break-inside:avoid;break-inside:avoid-column}.mw-parser-output .reflist-upper-alpha{list-style-type:upper-alpha}.mw-parser-output .reflist-upper-roman{list-style-type:upper-roman}.mw-parser-output .reflist-lower-alpha{list-style-type:lower-alpha}.mw-parser-output .reflist-lower-greek{list-style-type:lower-greek}.mw-parser-output .reflist-lower-roman{list-style-type:lower-roman}</style><div class="reflist"> <div class="mw-references-wrap"><ol class="references"> <li id="cite_note-1"><span class="mw-cite-backlink"><b><a href="#cite_ref-1">^</a></b></span> <span class="reference-text">Wright, Mike, Steve Thompson, and Ken Robbie. "Venture capital and management-led, leveraged buyouts: a European perspective." Journal of Business venturing 7.1 (1992): 47-71.</span> </li> <li id="cite_note-2"><span class="mw-cite-backlink"><b><a href="#cite_ref-2">^</a></b></span> <span class="reference-text"><style data-mw-deduplicate="TemplateStyles:r1238218222">.mw-parser-output cite.citation{font-style:inherit;word-wrap:break-word}.mw-parser-output .citation q{quotes:"\"""\"""'""'"}.mw-parser-output .citation:target{background-color:rgba(0,127,255,0.133)}.mw-parser-output .id-lock-free.id-lock-free a{background:url("//upload.wikimedia.org/wikipedia/commons/6/65/Lock-green.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-limited.id-lock-limited a,.mw-parser-output .id-lock-registration.id-lock-registration a{background:url("//upload.wikimedia.org/wikipedia/commons/d/d6/Lock-gray-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-subscription.id-lock-subscription a{background:url("//upload.wikimedia.org/wikipedia/commons/a/aa/Lock-red-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .cs1-ws-icon a{background:url("//upload.wikimedia.org/wikipedia/commons/4/4c/Wikisource-logo.svg")right 0.1em center/12px no-repeat}body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-free a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-limited a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-registration a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-subscription a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .cs1-ws-icon a{background-size:contain;padding:0 1em 0 0}.mw-parser-output .cs1-code{color:inherit;background:inherit;border:none;padding:inherit}.mw-parser-output .cs1-hidden-error{display:none;color:var(--color-error,#d33)}.mw-parser-output .cs1-visible-error{color:var(--color-error,#d33)}.mw-parser-output .cs1-maint{display:none;color:#085;margin-left:0.3em}.mw-parser-output .cs1-kern-left{padding-left:0.2em}.mw-parser-output .cs1-kern-right{padding-right:0.2em}.mw-parser-output .citation .mw-selflink{font-weight:inherit}@media screen{.mw-parser-output .cs1-format{font-size:95%}html.skin-theme-clientpref-night .mw-parser-output .cs1-maint{color:#18911f}}@media screen and (prefers-color-scheme:dark){html.skin-theme-clientpref-os .mw-parser-output .cs1-maint{color:#18911f}}</style><cite id="CITEREFBadawiWebber2015" class="citation journal cs1">Badawi, Adam B.; <a href="/wiki/David_H._Webber" title="David H. Webber">Webber, David H.</a> (2015). <a rel="nofollow" class="external text" href="https://scholarship.law.bu.edu/cgi/viewcontent.cgi?article=1036&context=faculty_scholarship">"Does the Quality of the Plaintiffs' Law Firm Matter in Deal Litigation?"</a>. <i>The Journal of Corporation Law</i>. <b>41</b> (2): 105<span class="reference-accessdate">. Retrieved <span class="nowrap">19 November</span> 2019</span>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=article&rft.jtitle=The+Journal+of+Corporation+Law&rft.atitle=Does+the+Quality+of+the+Plaintiffs%27+Law+Firm+Matter+in+Deal+Litigation%3F&rft.volume=41&rft.issue=2&rft.pages=105&rft.date=2015&rft.aulast=Badawi&rft.aufirst=Adam+B.&rft.au=Webber%2C+David+H.&rft_id=https%3A%2F%2Fscholarship.law.bu.edu%2Fcgi%2Fviewcontent.cgi%3Farticle%3D1036%26context%3Dfaculty_scholarship&rfr_id=info%3Asid%2Fen.wikipedia.org%3AManagement+buyout" class="Z3988"></span></span> </li> <li id="cite_note-3"><span class="mw-cite-backlink"><b><a href="#cite_ref-3">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite class="citation web cs1"><a rel="nofollow" class="external text" href="https://web.archive.org/web/20100315142717/http://www.nottingham.ac.uk/business/cmbor/Press/23February2009.html">"European buy-out market hits a seven year low, reports the Centre for Management Buy-out Research"</a>. 2009-02-23. Archived from <a rel="nofollow" class="external text" href="http://www.nottingham.ac.uk/business/cmbor/Press/23February2009.html">the original</a> on 2010-03-15<span class="reference-accessdate">. Retrieved <span class="nowrap">2011-10-06</span></span>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=unknown&rft.btitle=European+buy-out+market+hits+a+seven+year+low%2C+reports+the+Centre+for+Management+Buy-out+Research&rft.date=2009-02-23&rft_id=http%3A%2F%2Fwww.nottingham.ac.uk%2Fbusiness%2Fcmbor%2FPress%2F23February2009.html&rfr_id=info%3Asid%2Fen.wikipedia.org%3AManagement+buyout" class="Z3988"></span></span> </li> <li id="cite_note-4"><span class="mw-cite-backlink"><b><a href="#cite_ref-4">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite class="citation web cs1"><a rel="nofollow" class="external text" href="https://www.prweb.com/releases/non_profit_public_sector_organizations_embrace_open_book_management_by_implementing_the_great_game_of_business/prweb12461383.htm">"Non-Profit & Public Sector Organizations Embrace Open-Book Management by Implementing the Great Game of Business"</a>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=unknown&rft.btitle=Non-Profit+%26+Public+Sector+Organizations+Embrace+Open-Book+Management+by+Implementing+the+Great+Game+of+Business&rft_id=https%3A%2F%2Fwww.prweb.com%2Freleases%2Fnon_profit_public_sector_organizations_embrace_open_book_management_by_implementing_the_great_game_of_business%2Fprweb12461383.htm&rfr_id=info%3Asid%2Fen.wikipedia.org%3AManagement+buyout" class="Z3988"></span></span> </li> <li id="cite_note-5"><span class="mw-cite-backlink"><b><a href="#cite_ref-5">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFBrandle2009" class="citation magazine cs1">Brandle, Lars (24 September 2009). <a rel="nofollow" class="external text" href="https://archive.today/20130115032547/http://www.billboard.biz/bbbiz/content_display/industry/news/e3i1224fdfbab2618f30d2dc43dba2b7464">"Australia's Sanity In Management Buyout"</a>. <i>Billboard</i>. Archived from <a rel="nofollow" class="external text" href="http://www.billboard.biz/bbbiz/content_display/industry/news/e3i1224fdfbab2618f30d2dc43dba2b7464">the original</a> on 15 January 2013<span class="reference-accessdate">. Retrieved <span class="nowrap">15 March</span> 2013</span>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=article&rft.jtitle=Billboard&rft.atitle=Australia%27s+Sanity+In+Management+Buyout&rft.date=2009-09-24&rft.aulast=Brandle&rft.aufirst=Lars&rft_id=http%3A%2F%2Fwww.billboard.biz%2Fbbbiz%2Fcontent_display%2Findustry%2Fnews%2Fe3i1224fdfbab2618f30d2dc43dba2b7464&rfr_id=info%3Asid%2Fen.wikipedia.org%3AManagement+buyout" class="Z3988"></span></span> </li> <li id="cite_note-6"><span class="mw-cite-backlink"><b><a href="#cite_ref-6">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFPallisco2009" class="citation web cs1">Pallisco, Marc (26 September 2009). <a rel="nofollow" class="external text" href="http://www.realestatesource.com.au/sanity-entertainment-owner-of-virgin-hmv-sells-to-management-team-for-undisclosed-sum.html">"Sanity Entertainment, owner of Virgin, HMV, sells to management team for undisclosed sum"</a>. <i>RealEstateSource.com.au</i><span class="reference-accessdate">. Retrieved <span class="nowrap">15 March</span> 2013</span>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=unknown&rft.jtitle=RealEstateSource.com.au&rft.atitle=Sanity+Entertainment%2C+owner+of+Virgin%2C+HMV%2C+sells+to+management+team+for+undisclosed+sum&rft.date=2009-09-26&rft.aulast=Pallisco&rft.aufirst=Marc&rft_id=http%3A%2F%2Fwww.realestatesource.com.au%2Fsanity-entertainment-owner-of-virgin-hmv-sells-to-management-team-for-undisclosed-sum.html&rfr_id=info%3Asid%2Fen.wikipedia.org%3AManagement+buyout" class="Z3988"></span></span> </li> <li id="cite_note-7"><span class="mw-cite-backlink"><b><a href="#cite_ref-7">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFOsborn2017" class="citation web cs1">Osborn, Alex (16 June 2017). <a rel="nofollow" class="external text" href="http://www.ign.com/articles/2017/06/16/e3-2017-io-interactive-officially-goes-indie-gains-full-rights-to-hitman-ip">"E3 2017: IO Interactive Officially Goes Indie, Gains Full Rights to Hitman IP"</a>. <i>ign.com</i>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=unknown&rft.jtitle=ign.com&rft.atitle=E3+2017%3A+IO+Interactive+Officially+Goes+Indie%2C+Gains+Full+Rights+to+Hitman+IP&rft.date=2017-06-16&rft.aulast=Osborn&rft.aufirst=Alex&rft_id=http%3A%2F%2Fwww.ign.com%2Farticles%2F2017%2F06%2F16%2Fe3-2017-io-interactive-officially-goes-indie-gains-full-rights-to-hitman-ip&rfr_id=info%3Asid%2Fen.wikipedia.org%3AManagement+buyout" class="Z3988"></span></span> </li> </ol></div></div> <div class="mw-heading mw-heading2"><h2 id="External_links">External links</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Management_buyout&action=edit&section=10" title="Edit section: External links"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li><a rel="nofollow" class="external text" href="http://www.investopedia.com/terms/m/mbo.asp">Definition of <i>management buyout</i></a></li> <li><a rel="nofollow" class="external text" href="http://www.investopedia.com/terms/b/buyinmanagementbuyout.asp">Definition of <i>buy-in management buyout</i></a></li></ul> <p><br /> </p> <div class="navbox-styles"><style data-mw-deduplicate="TemplateStyles:r1129693374">.mw-parser-output .hlist dl,.mw-parser-output .hlist ol,.mw-parser-output .hlist ul{margin:0;padding:0}.mw-parser-output .hlist dd,.mw-parser-output .hlist dt,.mw-parser-output .hlist li{margin:0;display:inline}.mw-parser-output .hlist.inline,.mw-parser-output .hlist.inline dl,.mw-parser-output .hlist.inline ol,.mw-parser-output .hlist.inline ul,.mw-parser-output .hlist dl dl,.mw-parser-output .hlist dl ol,.mw-parser-output .hlist dl ul,.mw-parser-output .hlist ol dl,.mw-parser-output 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title="Mezzanine capital">Mezzanine</a></li> <li><a href="/wiki/Growth_capital" title="Growth capital">Growth</a></li> <li><a href="/wiki/Private_equity_secondary_market" class="mw-redirect" title="Private equity secondary market">Secondaries</a></li> <li><a href="/wiki/Equity_co-investment" title="Equity co-investment">Equity co-investment</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/History_of_private_equity_and_venture_capital" title="History of private equity and venture capital">History</a></th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Early_history_of_private_equity" title="Early history of private equity">Early history</a></li> <li><a href="/wiki/Private_equity_in_the_1980s" title="Private equity in the 1980s">1980s</a></li> <li><a href="/wiki/Private_equity_in_the_1990s" title="Private equity in the 1990s">1990s</a></li> <li><a href="/wiki/Private_equity_in_the_2000s" title="Private equity in the 2000s">2000s</a></li> <li><a href="/wiki/Private_equity_in_the_2010s" title="Private equity in the 2010s">2010s</a></li> <li><a href="/wiki/Private_equity_in_the_2020s" title="Private equity in the 2020s">2020s</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Terms and <br />concepts</th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"></div><table class="nowraplinks navbox-subgroup" style="border-spacing:0"><tbody><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Leveraged_buyout" title="Leveraged buyout">Buyout</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Financial_sponsor" title="Financial sponsor">Financial sponsor</a></li> <li><a class="mw-selflink selflink">Management buyout</a></li> <li><a href="/wiki/Divisional_buyout" title="Divisional buyout">Divisional buyout</a></li> <li><a href="/wiki/Buy%E2%80%93sell_agreement" title="Buy–sell agreement">Buy–sell agreement</a></li> <li><a href="/wiki/Leveraged_recapitalization" title="Leveraged recapitalization">Leveraged recapitalization</a></li> <li><a href="/wiki/Dividend_recapitalization" title="Dividend recapitalization">Dividend recapitalization</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Venture_capital" title="Venture capital">Venture</a></th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Angel_investor" title="Angel investor">Angel investor</a></li> <li><a href="/wiki/Business_incubator" title="Business incubator">Business incubator</a></li> <li><a href="/wiki/Post-money_valuation" title="Post-money valuation">Post-money valuation</a></li> <li><a href="/wiki/Pre-money_valuation" title="Pre-money valuation">Pre-money valuation</a></li> <li><a href="/wiki/Simple_agreement_for_future_equity" title="Simple agreement for future equity">SAFE</a></li> <li><a href="/wiki/Seed_money" title="Seed money">Seed money</a></li> <li><a href="/wiki/Startup_company" title="Startup company">Startup company</a></li> <li><a href="/wiki/Venture_capital_financing" class="mw-redirect" title="Venture capital financing">Venture capital financing</a></li> <li><a href="/wiki/Venture_debt" title="Venture debt">Venture debt</a></li> <li><a href="/wiki/Venture_round" title="Venture round">Venture round</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Structure</th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Private_equity_firm" title="Private equity firm">Private equity firms</a> and <a href="/wiki/Private_equity_fund" title="Private equity fund">funds</a></li> <li><a href="/wiki/Limited_partnership" title="Limited partnership">Limited partnership</a></li> <li><a href="/wiki/Limited_liability_company" title="Limited liability company">Limited liability company</a></li> <li><a href="/wiki/Carried_interest" title="Carried interest">Carried interest</a></li> <li><a href="/wiki/Management_fee" title="Management fee">Management fee</a></li> <li><a href="/wiki/Pledge_fund" title="Pledge fund">Pledge fund</a></li> <li><a href="/wiki/Publicly_traded_private_equity" title="Publicly traded private equity">Publicly traded private equity</a> <ul><li><a href="/wiki/Business_Development_Company" title="Business Development Company">Business Development Company</a></li> <li><a href="/wiki/Venture_capital_trust" title="Venture capital trust">Venture capital trust</a></li></ul></li> <li><a href="/wiki/Private_investment_in_public_equity" title="Private investment in public equity">Private investment in public equity (PIPE)</a></li> <li><a href="/wiki/Special-purpose_acquisition_company" title="Special-purpose acquisition company">SPAC</a></li></ul> </div></td></tr></tbody></table><div></div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Investors</th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Corporate_venture_capital" title="Corporate venture capital">Corporations</a></li> <li><a href="/wiki/Institutional_investor" title="Institutional investor">Institutional investors</a></li> <li><a href="/wiki/Pension_fund" title="Pension fund">Pension funds</a></li> <li><a href="/wiki/Insurance#Insurance_companies" title="Insurance">Insurance companies</a></li> <li><a href="/wiki/Fund_of_funds" title="Fund of funds">Fund of funds</a></li> <li><a href="/wiki/Financial_endowment" title="Financial endowment">Endowments</a></li> <li><a href="/wiki/Private_foundation" title="Private foundation">Foundations</a></li> <li><a href="/wiki/Investment_banking" title="Investment banking">Investment banks</a></li> <li><a href="/wiki/Merchant_bank" title="Merchant bank">Merchant banks</a></li> <li><a href="/wiki/Commercial_bank" title="Commercial bank">Commercial banks</a></li> <li><a href="/wiki/High-net-worth_individual" title="High-net-worth individual">High-net-worth individuals</a></li> <li><a href="/wiki/Family_office" title="Family office">Family offices</a></li> <li><a href="/wiki/Sovereign_wealth_fund" title="Sovereign wealth fund">Sovereign wealth funds</a></li> <li><a href="/wiki/Crowdfunding" title="Crowdfunding">Crowdfunding</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Related <br />financial terms</th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Assets_under_management" title="Assets under management">AUM</a></li> <li><a href="/wiki/Capitalization_table" title="Capitalization table">Cap table</a></li> <li><a href="/wiki/Capital_call" title="Capital call">Capital call</a></li> <li><a href="/wiki/Capital_commitment" title="Capital commitment">Capital commitment</a></li> <li><a href="/wiki/Capital_structure" title="Capital structure">Capital structure</a></li> <li><a href="/wiki/Distribution_waterfall" title="Distribution waterfall">Distribution waterfall</a></li> <li><a href="/wiki/Earnings_before_interest,_taxes,_depreciation_and_amortization" title="Earnings before interest, taxes, depreciation and amortization">EBITDA</a></li> <li><a href="/wiki/Envy_ratio" title="Envy ratio">Envy ratio</a></li> <li><a href="/wiki/High-yield_debt" title="High-yield debt">High-yield debt</a></li> <li><a href="/wiki/Initial_public_offering" title="Initial public offering">IPO</a></li> <li><a href="/wiki/Internal_rate_of_return" title="Internal rate of return">IRR</a></li> <li><a href="/wiki/Leverage_(finance)" title="Leverage (finance)">Leverage</a></li> <li><a href="/wiki/Liquidation_preference" title="Liquidation preference">Liquidation preference</a></li> <li><a href="/wiki/Mergers_and_acquisitions" title="Mergers and acquisitions">M&A</a></li> <li><a href="/wiki/Public_Market_Equivalent" title="Public Market Equivalent">PME</a></li> <li><a href="/wiki/Taxation_of_private_equity_and_hedge_funds" title="Taxation of private equity and hedge funds">Taxation of private equity and hedge funds</a></li> <li><a href="/wiki/Undercapitalization" title="Undercapitalization">Undercapitalization</a></li> <li><a href="/wiki/Vintage_year" title="Vintage year">Vintage year</a></li></ul> </div></td></tr><tr><td class="navbox-abovebelow" colspan="2"><div> <ul><li><span class="noviewer" typeof="mw:File"><span title="Category"><img alt="" src="//upload.wikimedia.org/wikipedia/en/thumb/9/96/Symbol_category_class.svg/16px-Symbol_category_class.svg.png" decoding="async" width="16" height="16" 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