Jurisdiction(s):
United Kingdom

Key definition

Buyout definition

What does Buyout mean? In corporate practice, a buyout is the acquisition of a company or of a controlling interest in its shares, giving the buyer effective control of the target. It is a market term used in M&A and private equity rather than one defined by statute or case law. Common forms are the management buyout (MBO), where existing managers take control (often with private equity funding), and the leveraged buyout (LBO), where a sponsor acquires control using significant third‑party acquisition debt, typically secured on the target group. Other variants include management buy‑in (MBI), secondary buyouts between sponsors, carve‑outs...

Rescue buyouts and pre-pack administrations for distressed companies: private equity MBO process, due diligence, key documents, finance and completion

Published by a LexisNexis Corporate expert

Practice notes

What is a rescue buyout?

A company or business in a rescue scenario is typically facing potential financial strain, for example when it:

has a short-term inability to meet its debts, or
lacks capital or alternative finance to support medium to long-term development

In private equity terms, following the 2007–2008 credit crunch, many funds actively sought to acquire troubled companies, with the intention of engineering turnarounds and folding them into their portfolios. This sort of distressed investment is counter-cyclical and can be a practical way to spread risk and balance exposure within a portfolio. By contrast, incumbent private equity investors backing distressed businesses could themselves become targets if a portfolio company moved into the ‘zone of insolvency’.

The following types of company are commonly viewed as suitable for turnaround by private equity firms, in particular those that:

need operational and financial reshaping
face structural issues
possess a sound core business (i.e. a strong product/service with clear market demand), or
suffer from weak management (that can be strengthened)

Thorough due diligence is essential to understand the present difficulties and to assess the organisation’s financial and operational structure in detail...

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Web page updated on 22/05/2026

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