Management Buy-In - MBI

Categories: Company Management

Will they accept it? Will the CFO, the head of HR, the head of sales, and most importantly, the VP Engineering who runs his troops like Patton on a beach assault...embrace the new CEO's strategy?

Without management buy-in, bad things happen. It's like hiring soliders to fight a war they don't understand or believe in.

Like...think about the vast difference in the fight against Hitler and totalitarianist Japan...versus whatever it was that we did in Vietnam and Cambodia. Buy-in matters. It makes people behave in more aligned fashion. And with lots of intense people in a boat, having them all rowing the same cadence and direction has a lot to do with how well the boat...floats.

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Finance: What is MBO v LBO?17 Views

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Finance allah shmoop What is an m b o versus

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and lbo Okay let's Get their letters right first And

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n b o is a management buyout Ngos on their

00:15

own aren't all that common But in a given company

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inside management might own same thirty percent of the stock

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They might partner with another investor who owns a twenty

00:25

percent or more And then they might borrow say fifty

00:28

percent in debt and take the company private fixit pivot

00:33

tweak live with bad quarters for a while without wall

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street yelling at him And then they might sell the

00:38

company cell or whatever Maybe take it public again will

00:41

The distinctive feature here is that the company is already

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in place Management is doing the deal and more often

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than not essentially all the net worth of the management

00:51

will be in the company leveraged when the embryo is

00:54

completed And that level of financial commitment really keeps the

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team focused Because if things don't work out when they

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lose everything your house their car in there Slinky collection

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All right next up we have an lbo which is

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a leveraged buyout and it just refers to the practice

01:10

Of taking on debt to buy a company sometimes with

01:13

same management sometimes with different players like an lbo is

01:17

a bigger venn diagram set than the embryo thing Well

01:20

in an lbo the same basic thing happens But in

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a whole bunch of cases management is tossed out The

01:26

company wouldn't be quote vulnerable unquote to an lbo Had

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management done a good job and kept the company trading

01:33

or valued at a high multiple where it would then

01:36

be almost impossible to make the risk reward scenario workout

01:39

in taking out a whole lot of debt to get

01:41

company bought and then turned in the right direction Instead

01:44

new management in lbo is usually brought in and resembling

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moses noah and other biblical characters and their perceived greatness

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and there's a stone tablet with a new set of

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commandments Thou shalt be profitable or something like that Arguments

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are had at the board level and eventually either the

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lbo works and the company has taken public again or

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sold for a big price Or it isn't and wrath 00:02:06.63 --> [endTime] has had

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