Existing managers buy the company. Ownership stays with a small leadership group.
A management buyout is a sale of the company to its current leadership team. The buyers are a few managers who already run the business. They usually finance the purchase with bank debt, a seller note, or outside equity. Some management buyouts bring in a private equity partner to fund the purchase.
The managers become the owners. The rest of the workforce does not receive an ownership stake from the deal. Employee ownership is a different path. It spreads ownership across eligible employees through an ESOP, a worker co-op, or an EOT.
A management buyout can keep day-to-day operations stable. It is a conventional sale. It does not carry the seller or company tax benefits that some employee-ownership sales do. In Day Zero and Aha Planner, a management buyout sits under financial sale.
Project Equity and the National Center for Employee Ownership treat a management buyout as distinct from employee ownership. Comerica draws the same line: a management buyout is a limited group of key employees; an ESOP holds shares in trust for the broader employee base.