What is the difference between an MBI and an MBO?

Following the period of unrest numerous businesses endured as a result of the global pandemic, many business owners are now keen to establish a long-term plan for succession.

This is where MBIs (management buy-ins) and MBOs (management buy-outs) can be utilised, as they are two of the most common ways in which a company’s ownership can change hands.

Let’s have a look at the differences between these two procedures.

MBI (management buy-in)

An MBI is when ownership of a company is purchased by an external management group. When an MBI occurs, the purchasing group will, more often than not, replace the existing management structure with their own. This will not just occur simply because the exiting business owner or shareholders do not trust the existing management to run the company.

Rather, MBIs are often favoured due to a desire to bring in expertise from other sectors, who can assess the business with a fresh perspective. Furthermore, external management groups will typically have sizable financial reserves, so can offer a large cash injection to a business, allowing it to expand or update easily.

One downside of an MBI is that there is a tremendous amount of due diligence that must be done before a deal can go through. This process can be rather invasive as information that is commercially sensitive may need to be disclosed to a third party.

MBO (management buy-out)

An MBO is when a company’s ownership is purchased by its existing management team. MBOs are a commonly seen form of succession, as for many it seems only natural that management replace retiring ownership.

A strength of an MBO is that one would expect the existing management team to already have an acute understanding of the values, culture, strengths, and weaknesses, of the business. This should allow for a smooth transition of power and is unlikely to cause worry or unrest amongst employees or clients.

Furthermore, retaining the existing management team can be viewed as a safer option than introducing outsiders. This is because if an outside group is introduced, it cannot be certain how well they will gel with existing employees, shareholders, and clients.



Although an MBO will require much less due diligence to be carried out than an MBI would, a downside of an MBO is that you will be unlikely to be introducing any new expertise, perspectives, or finances, meaning that although there will be an understanding of the business’s weaknesses, there may not be the resources available to improve upon them.

BIMBO (buy-in management buy-out)

A BIMBO is a combination of an MBI and an MBO. This occurs when a company is purchased by a combination of existing management team members and outside backers, who will then join the management team. This process, whilst less common, can often solve for the weaknesses of both MBOs and MBIs.

Existing management will have a keen understanding of the business and its culture, whilst outside backers will offer alternative expertise and financial strength.

Contact our corporate solicitors

Our MBI and MBO solicitors are happy to talk to you and discuss your needs and situation wherever you are in the succession planning process.

We understand that your business is unique, and we take the time to get to know you and your company and deliver tailor-made legal solutions that are right for you.

We have solicitors in London, Brighton, Eastbourne, Hastings, Uckfield, and Ulverston, and we work with clients across the UK.