Employee Buyout (EBO) - Explained
What is an Employee Buyout?
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Table of ContentsWhat is an Employee Buyout?How does an Employee Buyout Work? Academic Research on Employee Buyout
What is an Employee Buyout?
An employee buyout (EBO) is a term used to describe a situation in which employees of the firm buy a majority of shares in its own company. An EBO is often exercised in the time when the company faces financial crisis.
How does an Employee Buyout Work?
An EBO is a strategic maneuver to overcome financial stress. The company may choose between a leveraged buyout and an employee buyout. EBOs generally include a downsizing of company personal. An EBO is carried out when the board offers the option to purchase a majority ownership percentage to a select group of employees. This offering requires consensus among employees to pool funds (or arrange debt) to buy such a large portion of shares in the company.
Academic Research on Employee Buyout
- Employee buyouts: causes, structure, and consequences1, Chaplinsky, S., Niehaus, G., & Van de Gucht, L. (1998).Journal of Financial Economics,48(3), 283-332. This paper examines what and why an employee is included in leverage buyouts compare to the transaction buyouts where only top-level managers are involved and a major discovery of this is that employee participation helps and boost financial capabilities which would otherwise not have been possible. Also, maintenance and enhancement of the incumbent managers control.
- Employee buyouts and the transformation of the Russian industry, Buck, T., Filatotchev, I., & Wright, M. (1994).Comparative Economic Studies,36(2), 1-15. Employee buyout has been widely criticized due to the fact that it does not provide new fund for investment and can lead to poor decisions in terms of operation and strategy. The authors study and analysis confirm this view but also suggests that it can lead to true industrial transformation.
- Management andEmployeeBuy-Outs in Central and Eastern Europe: Introduction, Ellerman, D. (1993).Management and Employee Buy-outs as a Technique of Privatization, 13-30. A management buy-out is usually made up of Top buyers in the company but when it is sponsored by the employees and non-managerial workers t is called employee buy-out (EBO). Manager/employee buy-out is when the managers and the employee are both involved in the buy-outs (MEBO). Privatization by MEBO often happen to small and medium firms and rarely happen to large firms because it requires a massive restructuring which sometimes involves breaking the enterprise into medium size scale.
- Privatization via management and employee buyouts: analysis and UK experience, Wright, M., Thompson, R. S., & Robbie, K. (1989). Annals of Public and Cooperative Economics,60(4), 399-430. Heald and steel considered the consequence for public enterprises if the conservative government remains in power and that the consequence will be far heavier. They could hardly at that time imagine how serious the consequence. By mid-1989 barely one-third of the UK enterprise was publicly owned and some were being prepared for privatization.
- Secondary privatization in Poland (Part I): Evolution of ownership structure and company performance in firms privatized byemployee buyouts, Kozarzewski, P., & Woodward, R. (2001). This volume contained research undertaken for the investigation companies after privatization. This was achieved through different research method. The research investigated scope, pace, and trends of secondary ownership changes, the factors and barriers affecting them and the degree of ownership concentration resulting from them by first analyzing the structure before, at, and after privatization and factors that leads to this.
- PostPrivatization Effects of Management andEmployeeBuyouts, Wright, M., Buck, T., & Filatotchev, I. (2002). Annals of Public and Cooperative Economics,73(3), 303-352. Management and employee buyouts play a major key role in state-owned privatization and this paper review and analyze the effects of privatization in developed and transition economy, trends and conceptual issues of the effects of privatization. Privatization can lead to major restructuring, but its effect depends on institutional context and restructuring. Union Considerations inEmployee Buyouts, Wilkus, M. (1991, April). InINDUSTRIAL RELATIONS RESEARCH ASSOCIATION(p. 508). Union consideration has been used as a collective bargain and political tools used to secure the progress of the economy but a decrease in union organization in the United States has weakened their bargaining power. This paper made an analysis targeted towards relationship among selected union, characteristics, the scope of union political action and union political outcome. This analysis also makes use of earlier studies.
- EMPLOYEEINVOLVEMENT IN UK BUS COMPANY OWNERSHIP IN THE POST DEREGULATION ERA, Roberts, C. C. (2000). This article examines the examines employee involvement in UK bus company. The effect of government policies, the willingness of both the employees to buy and the vendors to sell and the part played by external financing bodies. We discover employee involvement with only a few exceptions has proven to be short term.
- Buyoutsand the Transformation of Russian Industry, Buck, T., Filatotchev, I., & Wright, M. (1996). InInternational Business and Europe in Transition(pp. 145-167). Palgrave, London. After the breakout of the political and economic system of the former Soviet Union in the 1990s, progress in political democracy has been made but market economy evasive. Citizen associate market some factors which in reality has led to falling in economic growth. Transition to economic growth must deregulation, privatization, and privatization. Many governments decided to privatize first and concentrate on other reforms later, in an attempt to achieve an irreversible reform of the centrally planned economy
- The performance of employee buy-out: The case of Algeria., Boutifour, Z., & Miraoui, A. (2016)..International Journal of Technology Management & Sustainable Development,15(2). The articles aim to show how employee in developing country can improve their company performance and how they can tackle challenges which will lead to the success of their company, out of 73 employee buyout(EBO), 59 EBOs were studied and results that first third were closed or sold, second third was in financial difficulty and last third achieve remarkable growth in economic and financial performance during the first five years which is due to entrepreneurial management and job satisfaction of employee.
- Promotion of employee ownership and profit sharing in Europe, Poutsma, E., de Nijs, W., & Doorewaard, H. (1999). Economic and Industrial Democracy,20(2), 171-196. The major findings and diffusion of schemes of promotion of employee ownership and profit sharing (PEPPER) were researched in this article. PEPPER has led to an improvement in government policy on financial participation. Different government positions relate to distinct industrial relation system and demonstration of particular development with respect to issues in financial participation in France, Germany and the U.K