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Employee Buyout - EBO

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Definition of 'Employee Buyout - EBO'

A restructuring strategy in which employees buy a majority stake in their own firms. This form of buyout is often done by firms looking for an alternative to a leveraged buyout. Companies being sold can be either healthy companies or ones that are in significant financial distress.
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Investopedia explains 'Employee Buyout - EBO'

For small firms, an employee buyout will often focus on the sale of the company's entire assets, while for larger firms, the buyout may be on a subsidiary or division of the company. The official way an employee buyout occurs is through an employee stock ownership plan (ESOP). The buyout is complete when the ESOP owns 51% or more of the company's common shares.

Related Definitions

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    Leveraged Buyout - LBO

    The acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. Often, the assets of the company being acquired are used ...
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  • Reverse Leveraged Buyout

    The action of offering new shares to the public by companies that initially went private through past LBOs.
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  • Buyout

    The purchase of a company's shares in which the acquiring party gains controlling interest of the targeted firm. Incorporating a buyout strategy is a common technique used to gain access ...
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    • Management Buyout - MBO

      When the managers and/or executives of a company purchase controlling interest in a company from existing shareholders.
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    • Employee Stock Ownership Plan - ESOP

      A qualified, defined contribution, employee benefit (ERISA) plan designed to invest primarily in the stock of the sponsoring employer. ESOPs are "qualified" in the sense that the ESOP's ...
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    • Employee Stock Option - ESO

      A stock option granted to specified employees of a company. ESOs carry the right, but not the obligation, to buy a certain amount of shares in the company at a predetermined price. An ...
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    • Baptism by Fire

      A phrase originating from Europe that describes an employee that is learning something the hard way, like being immersed in their field of employment. Baptism by fire has its roots in ...
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    • Savior Plan

      When management and employees borrow money to invest in their failing company in an attempt to save it. Essentially, a savior plan precedes a management and employee buyout.
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    • Payroll

      The sum total of all compensation that a business must pay to its employees for a set period of time or on a given date. Payroll is usually managed by the accounting department of a ...
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