What Is Buy-In Management Buyout (BIMBO)?
A Buy-In Management BuyOut (BIMBO) is a form of a leveraged buyout (LBO) that incorporates characteristics of both a management buyout (MBO) along with a management buy-in (MBI).
A BIMBO occurs when existing management along with outside managers decide to buy out a company. The existing management represents the buyout portion while the outside managers represent the buy-in portion.
- A buy-in management buyout (BIMBO) occurs when an outside management team joins a company (buying-in) while also buying out the existing management team.
- This form of leveraged buyout (LBO) is used to streamline the transition from one owner to the next with little interruption in business operations.
- Like all LBOs, there are still risks of disruption, conflicts, and reduced performance - but these may be minimized as the new managers have bought in as owners as well.
Understanding Buy-In Management Buyout (BIMBO)
Buy-In Management Buyout (BIMBO) is a term that originated in Europe to describe a type of LBO that combines new external management with internal management to refresh the direction of the company and streamline operations. A leveraged buyout is the acquisition of a company using a significant amount of borrowed money to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for these loans, along with the assets of the acquiring company.
This option provides advantages of buy-in and buyout. The transfer will be made much more efficiently and without disruption, because the existing members of management are already familiar with the business. This management buyout is complemented with management buy-in, which results in the influx of leaders with expertise to fill in areas of need, be it in a new product or service under development, marketing, operations management, or finance.
A management buy-in is a corporate action in which an outside manager or management team purchases a controlling ownership stake in an outside company and replaces its existing management team. A management buyout is a transaction where a company’s existing management team purchases the assets and operations of the business they manage.
Taking Care of a Buy-In Management Buyout
New and existing managers must get along for the BIMBO to work. Energized new managers may have novel ideas that they wish to implement right away, while existing managers may fall into a turf-protection mode. Employees may take sides. Conflicts are inevitable, as they are in all organizations, but if they become too pronounced or distracting the business may not run as envisioned before the transaction took place.
An LBO involves an increase of debt on the balance sheet that must be managed responsibly by the management team. The risk is that debt service may not be handled smoothly, causing some financial stress in the new company. However, since each of the managers is now an owner of the company, each has every incentive to behave like owners, which means making rational decisions to increase the odds of success.