A buy-in management buyout (BIMBO) is a type of leveraged buyout (LBO) in which an experienced management team joins the business as owners while at the same time buying out the existing management team. This allows them to have maximum control over the company while still allowing the company ownership to transition with little disruption in daily operations.

BIMBO transactions offer an attractive way to change ownership while putting the control of the business in the hands of the management team. The goal of the buy in management team is to take advantage of any market opportunities that the exiting management team has been unable to pursue. By purchasing a large portion of the business, the incoming management team can make big changes rapidly. In addition, a BIMBO transaction can also facilitate a sale for the exiting ownership team, as the new owners may be able to pay them a higher price for their share due to the added control and value they can inject into the company.

In order for a BIMBO to take place, the new management team must secure a large portion of the company’s equity. This requires significant capital which is usually borrowed from banks or private equity sources. To make this financing feasible, the leveraged buyout usually requires the new management team to possess a deep knowledge of the industry and the strategies needed to success within it.

Despite the potential upsides that BIMBO transactions can bring, they may pose additional risks. The customary short term management overlaps may cause conflicts between the old and new teams. The new team must be able to recognize any potential areas of disruption and take steps to manage them, while also ensuring that the existing teams’ achievements and contributions are acknowledged. Furthermore, the performance of the business may be impacted by the leveraged buyout as well due to the capital intensive nature of the transaction.

A buy-in management buyout is a form of leveraged buyout that allows for quick ownership transitions with the potential for large upside. With the current state of the corporation and economic markets, BIMBOs are becoming an increasingly attractive option for buyers and sellers looking for an efficient and manageable transfer of ownership. While there are added risks involved, with the experience, capital and control of the incoming management team, BIMBOs may often be the better choice.