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. Buyout

    The purchase of a company's shares in which the acquiring party ...
  4. Employee Buyout - EBO

    A restructuring strategy in which employees buy a majority stake ...
  5. Investment

    An asset or item that is purchased with the hope that it will ...
  6. Hunting Elephants

    The practice of targeting large companies or customers.
RELATED FAQS
  1. If a company offers a buyback of its shares, how do I decide whether to accept the ...

    Tender offers for share buybacks are often made at a premium to the current market price; it may be in an investor’s best ... Read Full Answer >>
  2. How is a tender offer used by an individual, group or company seeking to purchase ...

    A tender offer is made directly to shareholders in a publicly traded company to gain enough shares to force a sale of the ... Read Full Answer >>
  3. What are the pros and cons of downround financing?

    Down round financing is often reflected in very negative terminology. In some cases, it can be very bad for existing shareholders. ... Read Full Answer >>
  4. What type of companies use downround financing?

    Down round financing involves selling stock to new investors at a lower price than the investors paid. Shares for the company ... Read Full Answer >>
  5. What are the pros and cons of holding a non-controlling interest in a company?

    Most investors hold a non-controlling interest – also known as a minority interest – of the companies in which they own shares. ... Read Full Answer >>
  6. Why would it be in the interest of shareholders to accept a tender offer?

    It would be in the best interests of shareholders to accept a tender offer if it is well above the current market price – ... 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. Investing Basics

    Explaining the Volcker Rule

    The Volcker Rule prevents commercial banks from engaging in high-risk, speculative trading for their own accounts.
  7. Investing

    How To Profit From M&A Announcements

    We look at four strategies that seek to profit from merger and acquisitions announcements.
  8. Personal Finance

    5 Assets Only The Ultra Rich Can Afford

    Yacht? Private jet? Not that unusual. If you’re rolling in the big bucks, you can buy something much more interesting.
  9. Stock Analysis

    The CVS Target Deal: A Healthy Union?

    The CVS Health and Target deal should be a win for both. Here's an analysis with a twist.
  10. Investing

    Effects Of Interest Rate Hikes On Private Equity

    Private Equity firms would be wise to lock in current interest rates on their debt payments in anticipation of rate hikes.

You May Also Like

Hot Definitions
  1. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  2. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  3. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  4. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  5. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  6. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!