Intermediaries In Management Buy-out: Comparison And Advice

Management Buy-out (MBO) was prevailing in European countries as well as the United States in 1980s due to its efficiency in cost cutting, management encouraging and company developing, etc. After 1990s, it was introduced to China as an important pattern for the reform of state-owned property rights and many kinds of MBO emerged one after another. But when we examine the cases we find that when they speak highly of MBO, the Chinese business circles are tend to ignore intermediaries, which will definitely play an important role in the development of MBO. Therefore, we focus on the intermediate agencies of MBO and try to find out the roles they play during the process. Furthermore, we will explain that such roles have close connection with the differences between domestic MBO cases and foreign ones, as well as the reasons for such differences.The author finds out that the three different theoretical orientations of intermediaries, that is, active intermediaries, midway intermediaries and passive intermediaries, are determined by the buy-out environment and intermediaries' behaviors. By studying cases from home and abroad, we discover that there are obvious levels in the roles of intermediaries: financing—restructuring the firm's earning pattern—controlling the strategy of the target firm. More importantly, such roles can be selected by the intermediaries themselves. According to their needs during buy-out, they can choose the active modes, or the passive modes, which will incur different costs respectively, and realize the optimal matching through free selection. However, because their functions have not been well recognized, the intermediaries are passive and secondary during MBO under the current framework of law and regulations due to their limited rallying point and practical competence. However, in virtue of their importance, we should pay enough attention to the cultivation of eligible intermediate agencies when China tries to bring MBO into play healthily and orderly.This article investigates the difference between MBO cases from home and abroad and their causes from a new point of view, and tries to provide useful reference to China's MBO development in accordance with the classification of different roles of intermediaries. We also offer feasible scheme for the cultivation of intermediaries so as to improve the MBO market.