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Finance allah shmoop What is an m b o versus

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and lbo Okay let's Get their letters right first And

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n b o is a management buyout Ngos on their

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own aren't all that common But in a given company

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inside management might own same thirty percent of the stock

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They might partner with another investor who owns a twenty

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percent or more And then they might borrow say fifty

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percent in debt and take the company private fixit pivot

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tweak live with bad quarters for a while without wall

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street yelling at him And then they might sell the

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company cell or whatever Maybe take it public again will

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The distinctive feature here is that the company is already

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in place Management is doing the deal and more often

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than not essentially all the net worth of the management

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will be in the company leveraged when the embryo is

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completed And that level of financial commitment really keeps the

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team focused Because if things don't work out when they

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lose everything your house their car in there Slinky collection

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All right next up we have an lbo which is

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a leveraged buyout and it just refers to the practice

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Of taking on debt to buy a company sometimes with

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same management sometimes with different players like an lbo is

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a bigger venn diagram set than the embryo thing Well

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in an lbo the same basic thing happens But in

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a whole bunch of cases management is tossed out The

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company wouldn't be quote vulnerable unquote to an lbo Had

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management done a good job and kept the company trading

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or valued at a high multiple where it would then

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be almost impossible to make the risk reward scenario workout

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in taking out a whole lot of debt to get

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company bought and then turned in the right direction Instead

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new management in lbo is usually brought in and resembling

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moses noah and other biblical characters and their perceived greatness

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and there's a stone tablet with a new set of

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commandments Thou shalt be profitable or something like that Arguments

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are had at the board level and eventually either the

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lbo works and the company has taken public again or

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sold for a big price Or it isn't and wrath 00:02:06.63 --> [endTime] has had

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