Institutional Buyout - IBO

AAA

DEFINITION of 'Institutional Buyout - IBO'

When an institutional investor, such as a private equity firm or a venture capitalist firm, acquires a controlling interest in a separate company. Institutional buyouts are the opposite of management buyouts (MBO), in which a business's current management acquires a large part of the company. Typically, the investor in an IBO will look to dispose of its stake in the company within a certain time frame.

INVESTOPEDIA EXPLAINS 'Institutional Buyout - IBO'

An institutional buyout can also involve instances where a private equity firm acquires a company and keeps the current management or hires new managers and gives them stakes in the business. In general, the private equity firm involved in the IBO will take charge in structuring and exiting the deal as well as hiring managers.

RELATED TERMS
  1. Management Buyout - MBO

    A transaction where a company’s management team purchases the ...
  2. Employee Stock Option - ESO

    A stock option granted to specified employees of a company. ESOs ...
  3. Employee Buyout - EBO

    A restructuring strategy in which employees buy a majority stake ...
  4. Buyout

    The purchase of a company's shares in which the acquiring party ...
  5. Investment

    An asset or item that is purchased with the hope that it will ...
  6. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative ...
RELATED FAQS
  1. How can investors influence the c-suite?

    Investors in publicly traded firms can influence C-suite executives by exercising voting rights or engaging in investor activism. ... Read Full Answer >>
  2. What does a merger or acquisition mean for the target company's employees?

    Suppose one sporting goods manufacturer merges with or acquires another sporting goods manufacturer. Before the merger and ... Read Full Answer >>
  3. What is the best reason to pursue a backward integration?

    Saving money on costs and improving efficiency are two good reasons to pursue backward integration. Backward integration ... Read Full Answer >>
  4. Is variance good or bad for stock investors?

    Variance is neither good nor bad for investors in and of itself. However, high variance in a stock is associated with higher ... Read Full Answer >>
  5. Is backward integration the same thing as vertical integration?

    Backward integration is a type of vertical integration, but they are not the same. Vertical integration is the process of ... Read Full Answer >>
  6. What is the difference between a summary prospectus and an offering memorandum?

    All securities offered to investors in the United States are required to comply with the anti-fraud provisions of federal ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Understanding Leveraged Buyouts

    LBOs are often presented as predatory by the media, but it really depends on which side of the deal you're on.
  2. Entrepreneurship

    Finding The Best Buyer For Your Small Business

    Learn more about the process business owners go through to seal a merger or acquisition deal.
  3. Retirement

    How The Big Boys Buy

    Learn what those in-the-know look for when acquiring a company.
  4. Investing

    Use Breakup Value To Find Undervalued Companies

    Find out a company's worth if it were sold in pieces - it may be more than you think.
  5. Bonds & Fixed Income

    Taking Advantage Of Corporate Decline

    A bankrupt company can provide great opportunities for savvy investors.
  6. Brokers

    Private Equity's Returns Are Tempered By Its Risks

    Private equity firms adopt approaches to quickly hike up earnings and boost returns, but these investments come with big risks too.
  7. Entrepreneurship

    The Risk And Rewards Of Investing In Startups

    Investing in startups is a very risky business but can reward investors greatly if and when they do pay off.
  8. Investing

    Top Alternative Investments To The Stock Market

    Dislike the stock market or want greater diversity? Here are some alternatives.
  9. Fundamental Analysis

    Explaining Enterprise Multiple

    The enterprise multiple is a ratio used to value a company as if it was going to be acquired.
  10. Chart Advisor

    3 Basic Material Stocks Poised For A Pop

    After large market swings such as the one seen on March 30, 2015, it is not surprising to see traders become more tolerant towards taking on risk.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center