Succession
A founder retiring
With an experienced management team in place and no heir active in the business — the most common situation among French SMEs. An MBO can be combined with a partial family succession.
Management buy-out · Buy-out by the management team · Succession
MBO — Management buy-out: acquiring the company you run
The founder is retiring, the fund wants to exit, the group is selling a subsidiary — and the management team you form already knows the customers, the people and the risks. A management buy-out (MBO) lets that team acquire the share capital through an acquisition holding company funded by its own investment, a private equity sponsor where needed, and debt repaid from the company's cash flows. Collaboration Capital sizes the debt, selects the lenders and the sponsor, and secures the shareholders' agreement and the management package. Deals from EUR 5 to 200 million.
Published 13 September 2026 · 2026 French legal and tax framework
4
balances in a successful MBO: price, debt, value sharing, governance
3.0–4.5×
typical acquisition debt / EBITDA, to be stress-tested at −20%
6–9
months from intention to completion
4–7
years' liquidity horizon when a sponsor is involved
01 · What an MBO involves
What is a management buy-out and what need does it meet?
A management buy-out (MBO) is the acquisition of a company by one or more directors or senior managers already working in it. The management team becomes a shareholder in the acquisition vehicle — an acquisition holding company — and holds, depending on the deal, a minority, significant or majority stake. When the deal is partly funded with acquisition debt, which is the most common case, the MBO is also a form of LBO: it is then called an LMBO (leveraged management buy-out).
An MBO is at once a succession transaction, a private equity transaction and, often, a leveraged transaction. These three dimensions cannot be handled separately: price, debt, value sharing and governance must all be consistent with one another.
The economic rationale of an MBO
Continuity. Entrusting the share capital to a team that already knows the customers, staff, assets and operational risks — the lowest execution risk of any form of business acquisition.
Succession without a change of leadership. Allowing a founder, a family, a group or a financial shareholder to sell all or part of the capital without changing who runs the business.
Alignment. Tying future value creation to the management team through a direct shareholding or a management package.
Leverage. Using debt as part of the funding when recurring cash flows allow it, and bringing in a sponsor when the managers' personal investment is not enough.
An MBO is not a bonus for management. The manager becomes an investor: they bear a risk of capital loss, accept liquidity rules, often commit for several years and must balance their interests as a director, a shareholder and sometimes a seller if they already hold shares. The quality of an MBO depends on how real that risk-taking is and how coherent the value sharing is.
When an MBO is the right answer
Private equity
A private equity fund exiting
The fund wants liquidity, management wants to pursue the project: a new sponsor funds the exit and management reinvests (secondary MBO).
Carve-out
A group divesting
An industrial group sells a non-core subsidiary to its management team, with a scope to carve out and head-office services to rebuild.
Independence
Spin-off of a business unit
A business with a structured management team becomes independent in terms of ownership, with a sponsor and lenders.
MBO, LBO, OBO, MBI, BIMBO: telling the structures apart
02 · The most common financial mechanism
Acquisition holding company, managers' investment, sponsor and debt: how an MBO is structured
The standard structure is to set up an acquisition holding company — in France usually an SAS (simplified joint-stock company) — whose shareholders are the management team and, where relevant, the financial sponsor. This holding company acquires the shares of the target company; the acquisition debt sits at its level, possibly supplemented by facilities at operating-company level. The main constraint is simple: managers rarely have the funds to finance the acquisition on their own.
A worked example: an MBO with a sponsor
A B2B services company with normalised EBITDA of EUR 5.0 million, an enterprise value of EUR 35 million (7.0×) and no existing net debt. Management wants to buy the company with a fund. On top of the EUR 35 million price come EUR 2 million of transaction costs and EUR 1 million of minimum cash. Management invests EUR 3 million, the sponsor EUR 17 million, senior debt provides EUR 15 million and a unitranche or mezzanine tranche EUR 3 million.
Where the value at exit comes from
After five years, with EBITDA up from EUR 5.0 million to EUR 7.0 million, an unchanged 7.0× multiple and net debt reduced from EUR 18 million to EUR 7 million, enterprise value reaches EUR 49 million and equity value EUR 42 million — 2.1× the EUR 20 million invested. Value creation comes from EBITDA growth (+EUR 14 million of enterprise value) and deleveraging (+EUR 11 million) at a stable multiple, with the entry costs and minimum cash (EUR 3 million) consumed.
A waterfall cannot be described as a percentage. If, after the sponsor's instruments have been repaid first, management is economically entitled to 20% of the residual gain, the model must calculate precisely what each party receives, then factor in the tax treatment of each instrument. A waterfall is tested in a full cap table model, across several exit scenarios — never on the base case alone. The ratios lenders look at — net debt/EBITDA, DSCR, interest cover — are set out on our page on the bank ratios funders require.
03 · Precautions for a successful MBO — and for living with it
The team first, then bankability, valuation and stress tests
The first due diligence in a management buy-out is on the team itself. A bank or a fund finances a company, but it also finances the team's ability to run it once the seller has gone.
Six questions to settle before any letter of intent
Who is leading the project? A CEO alone, a pair, or a wider team?
Who is actually investing, and how much of their own money?
What level of operational responsibility will each person have after completion?
Are there conflicts of loyalty or confidentiality towards the seller?
Which team member is essential to the financing? Lenders will name them in the documentation.
What level of governance is management willing to share with a sponsor?
Bankability criteria
A robust valuation and an honest normalised EBITDA
Management has better information than any external buyer. That is an advantage for the analysis — and a heightened duty of transparency towards the seller. The methods — comparable transaction multiples, DCF, asset-based approach — are those of any business valuation; what is specific to an MBO is the normalisation: the seller's remuneration, management's future remuneration, head-office costs, transition costs, related-party rents and services, bonuses. The classic mistake is to value the business on historical EBITDA that does not reflect the real cost of the organisation after completion.
Conflicts of interest. When directors hold inside information through their roles and are preparing their own offer, the conflict must be managed formally: a clean team where appropriate, separate advisers, an independent approval process, traceability of the information used and, in sensitive cases, an independent valuation or a fairness opinion. This protects the seller — and the managers themselves.
Stress tests before signing
The severe scenario shows why management must understand its potential capital loss before signing: leverage amplifies value creation, but it amplifies value destruction just as much when EBITDA, the multiple and deleveraging all deteriorate at the same time. A management package that only works in the base case is poorly calibrated.
Further reading
Let's scope your project in a 30-minute call.
Reply within 24 business hours
IOBSP ORIAS no. 25000696
Oops! Something went wrong while submitting the form.
The information collected is used solely to process your meeting request. You have the right to access, correct and delete it — see our legal notice.
04 · The parties involved
Who takes part in an MBO: managers, seller, sponsor, lenders, advisers
An MBO brings together a seller and buyers who have worked side by side for years. That is what makes it efficient — and why it requires separate advisers and documentation that clearly separates each role.
Buyers
The management team
Directors and key managers who invest and take operational control
A personal investment that is significant relative to their wealth, a direct shareholding and often a management package. They move from thinking like senior employees to thinking like owner-managers.
Seller
The seller
Founder, family, exiting fund or industrial group
May grant vendor financing, accept an earn-out or reinvest part of the price. Any post-completion involvement must be clearly framed (duration, remit, actual authority) to avoid two people running the business.
Investor
The financial sponsor
Private equity fund providing most of the equity
Board, reserved matters, monthly reporting, a liquidity horizon of four to seven years. An overly intrusive sponsor turns the manager-shareholder into a mere executor; the balance is negotiated in the shareholders' agreement.
Lenders
Banks and debt funds
Amortising senior debt, unitranche, mezzanine, working capital facility
They size the debt on actual free cash flow and require a pledge over the target's shares and the holding company's accounts, subordination of shareholder loans and distribution covenants. Bpifrance, France's public development bank, frequently co-finances.
Adviser
Financing transaction adviser
Collaboration Capital — IOBSP broker (French-registered intermediary in banking transactions and payment services), ORIAS no. 25000696
Feasibility analysis, EBITDA normalisation, modelling with and without a sponsor, selection of lenders and sponsor, coordination through to completion. No exclusivity. Management keeps its own adviser; the seller has theirs.
Expertise
Lawyers, tax advisers, valuers, auditors
SPA, shareholders' agreement, package, financing, due diligence
The tax adviser designs the package with Article 163 bis H in mind from the outset; the lawyer aligns the shareholders' agreement, articles of association, employment contracts and leaver clauses; the auditors give lenders a report that is independent of the managers' convictions.
05 · Technical financial, legal and tax points
Interest relief, tax consolidation, the 163 bis H management package, shareholders' agreement, leaver clauses, financial assistance
The points below are given for information, on the basis of the French legislation in force in 2026; each must be validated by legal and tax advisers for the specific transaction.
Interest deductibility: a cap, not a right
An MBO does not create an unlimited right to deduct interest on the acquisition debt. France caps the deduction of net borrowing costs at the higher of EUR 3 million or 30% of tax EBITDA (Article 212 bis of the French General Tax Code (CGI), transposing the ATAD Directive 2016/1164), subject to thin-capitalisation rules and anti-abuse provisions. The model must distinguish bank EBITDA, used for covenants, from tax EBITDA. An MBO should never be viable solely thanks to a theoretical tax saving.
Parent-subsidiary regime, tax consolidation and the Charasse amendment
Subject to conditions, dividends paid by the target to the holding company qualify for the French parent-subsidiary regime (Article 216 CGI), with a taxable share of costs and expenses. Tax consolidation (Article 223 A) can offset the holding company's interest expense against the target's profits, but its effectiveness must be tested against the cap described above. A point specific to MBOs: when the seller, certain managers or long-standing shareholders reinvest in the holding company, the French rule known as the Charasse amendment can add back part of the financial expense — it must be analysed before designing the structure.
Management package and Article 163 bis H of the French General Tax Code
The management package is at the heart of an MBO: it organises management's share in value creation. Since 2025, Article 163 bis H of the French General Tax Code, amended in 2026, governs gains linked to an employee's or executive's role; the French Conseil d'État decisions of 13 July 2021 had already drawn the line between a capital gain and a benefit linked to one's role. Usual instruments: ordinary shares, preference shares, share warrants (BSA), free shares (AGA) or options where conditions allow, and reinvestment of shares or cash.
An economically justifiable entry price, documented with an independent valuation or a defensible methodology.
A real risk of capital loss and no artificial guaranteed return.
Liquidity and leaver conditions consistent with being a shareholder, not an employee.
Consistency between economic rights and the price paid — sweet equity, which increases management's share above a threshold, must be valued and documented.
Shareholders' agreement: operational autonomy and reserved matters
The shareholders' agreement is the economic constitution of the MBO. It distinguishes what management decides alone, what goes to the board and what requires the sponsor's consent: annual budget and business plan, acquisitions and disposals above a threshold, new debt and guarantees, capex above a threshold, hiring or departure of key executives, dividend policy, major disputes, change of strategy. The right balance is genuine operational autonomy combined with control rights over structural decisions.
Good leaver, bad leaver: when a manager leaves
The clauses must be proportionate and aligned with the employment contract and the corporate office; an excessive discount or a poorly drafted undertaking leads to litigation. Liquidity clauses come on top: tag-along, drag-along, IPO provisions, a time-bound liquidity clause, pre-emption and approval rights, a ratchet or a waterfall for sharing the capital gain.
Financial assistance, security and upstreaming cash
The fact that management becomes a shareholder does not allow the target to finance its own buy-out freely: for French sociétés anonymes, Article L.225-216 of the French Commercial Code prohibits advancing funds, granting loans or providing security for the purpose of acquiring the company's own shares. Usual security: a pledge over the target's shares held by the holding company, a pledge over the holding company's accounts, subordination of shareholder loans, distribution covenants. Upstreamed dividends require distributable profits and compliance with banking restrictions: a serious model builds a real cash timetable, not an assumption that dividends equal net profit.
06 · Financial and tax advantages and benefits
What a management buy-out offers the seller, the managers and the company — and on what conditions
What the studies say. Research by France Invest, the French private equity association, on value creation in SMEs and mid-caps backed by private equity shows that it comes mainly from business growth, not from deleveraging alone. A good MBO therefore funds a development strategy — organic growth, acquisitive growth, international expansion — rather than a mere repayment mechanism.
07 · Three successful examples
Three documented management buy-outs: Ceva Santé Animale, DIAM, EFESO
Three public transactions, each illustrating a different structure: a founding LMBO that became a model of management ownership, a fund exiting to management, and large-scale reinvestment by a community of partners. Debt and valuation terms remain confidential; “successful” here means a transaction that was actually structured and completed.
Founding LMBO · 1999 →
Ceva Santé Animale: from LMBO to lasting management ownership
Animal health, Libourne (France)
Born in 1999 from a leveraged management buy-out of the animal health activities sold in the context of the Sanofi/Synthélabo merger, Ceva built an ownership model combining management and successive financial investors, while pursuing strong international expansion.
Lesson: a management team can become the stable core of the shareholding over several cycles; management reinvestment ensures continuity between sponsors and supports an acquisition strategy rather than a simple deleveraging logic.
Fund exit · 2018
DIAM: management LMBO with EMZ and BNP Paribas Développement
Manufacturer of point-of-sale displays and merchandising
In 2018, Ardian sold its majority stake in DIAM to the management team, backed by EMZ Partners and BNP Paribas Développement. The deal was presented as an LMBO supporting the management team, with several investors alongside one another to supplement the managers' investment capacity.
Broad-based MBO · 2023
Opening up the capital · 2022
EFESO Management Consultants: more than 65 partners reinvest
Operations consulting
In 2023, Eurazeo and EFESO's management welcomed TowerBrook as lead shareholder. More than 65 partners substantially reinvested their sale proceeds, with the capital opened up to more than 100 partners and managers; the existing sponsor reinvested alongside the new one.
Lesson: in consulting, software or professional services, a broad-based MBO is a powerful retention and alignment tool — provided entry, exit and leaver rules are managed for a large number of managers.
Matrix
Which MBO for which situation?
Founder leaving, strong team, moderate price → MBO with bank debt and vendor financing, without a sponsor; risk: leverage and residual reliance on the seller.
Fund exit, growth project → sponsor-backed secondary MBO; risk: governance and exit horizon.
Carve-out from a group → MBO with a sponsor and transitional services; risk: rebuilding support functions.
People-based services company → MBO extended to a community of managers; risk: entry and exit rules for a large number of people.
Going further
Let's scope your project in a 30-minute call.
Reply within 24 business hours
IOBSP ORIAS no. 25000696
Oops! Something went wrong while submitting the form.
The information collected is used solely to process your meeting request. You have the right to access, correct and delete it — see our legal notice.
08 · Preparation
From intention to completion in 6 to 9 months, then the first 100 days
A manager must never commit to a firm completion before the financing is secured: drawdown conditions, equity commitment letters, financing guarantees and break-fee mechanisms must be compatible with the obligations under the SPA (share purchase agreement).
01
Forming the core management team and defining roles
Who leads, who invests, who runs what after completion, who is essential to the financing.
Month 1
02
Preliminary analysis of value, investment capacity and debt capacity
Normalised EBITDA including management's future remuneration, free cash flow, a realistic personal investment, fundable debt.
Months 1–2
03
Approaching the seller or entering the organised process
Formal management of conflicts of interest; non-disclosure agreement and clean team if needed.
Month 2
04
Finding the financial sponsor and the lenders
Financing memorandum, approaching funds and banks, comparing term sheets. This is where Collaboration Capital brings in its club of funders.
Months 2–4
05
Letter of intent or indicative offer
LOI setting out price, structure, proposed financing, exclusivity and timetable.
Month 4
06
Financial, tax, legal, employment, commercial and ESG due diligence
Management knows the company; lenders want an independent report that tests its convictions. Human capital diligence: reliance on the founder, retention of second-line managers, succession plans, non-compete.
Month 5
07
Negotiating the SPA and the financing in parallel
Conditions precedent aligned with drawdown conditions; warranty and indemnity package (garantie d'actif et de passif); vendor financing and earn-out coordinated with the intercreditor agreement.
Months 5–6
08
Negotiating the shareholders' agreement and the management package
Reserved matters, board, leaver clauses, liquidity, waterfall; package valued and documented in light of Article 163 bis H.
Months 6–7
09
Financing documentation, security and intercreditor agreement
Credit agreement, pledges at holding-company level, subordination, covenants and distribution tests.
Months 7–8
10
Signing, conditions precedent and completion
Corporate approvals, consents where there is a change-of-control clause, funds flow, transfer of shares.
Months 8–9
11
100-day plan and dual reporting
Shareholder reporting and lender reporting; monthly dashboard: revenue and margin by segment, reported and adjusted EBITDA, cash conversion, capex, net debt, covenant headroom, pipeline, turnover in key teams.
Post-completion
The first 100 days: taking real control
Completion is not enough. Managers move from thinking like senior employees to thinking like owner-managers, which changes cash discipline, reporting, governance and priorities. The seller's temporary presence can help with the handover, provided it is framed in a transition agreement setting out its duration, remit, actual authority and remuneration.
GO / NO-GO checklist before any irreversible commitment
Is management genuinely independent of the seller?
Does normalised EBITDA include management's future remuneration?
Does the business plan withstand a 20% fall in EBITDA? Does debt service leave enough cash to invest?
Is the financing certain before the firm commitment under the SPA?
Is management investing an amount consistent with its personal wealth?
Is the management package valued and documented for tax purposes? Are the leaver clauses balanced and understandable?
Does the shareholders' agreement clearly separate operational autonomy from reserved matters?
Have conflicts of interest with the seller been documented?
Are the dividends needed to service the debt legally distributable? Does the structure comply with the financial assistance rules and the company's corporate interest?
Have tax consolidation, the Charasse rule and interest deductibility been modelled? Do the covenants have a safety margin?
Are the exit scenario and the liquidity mechanism explicit?
Frequently asked questions
Frequently asked questions about management buy-outs and how they are financed
What is the difference between an MBO and an LBO?
An LBO is the broad financial category: an acquisition funded by equity and debt at holding-company level. An MBO is a specific case in which the buyer is the existing management team. As soon as an MBO is partly funded with acquisition debt — the most common case — it is called an LMBO (leveraged management buy-out) and works like an LBO.
How much of their own money must the managers invest?
There is no regulatory percentage. The investment must be economically significant relative to the managers' wealth and remuneration, to reflect genuine alignment and a real risk of loss. In the worked example on this page, management invests EUR 3 million, or 15% of the equity, and the sponsor EUR 17 million; lenders want to see that the managers have something to lose, not that they fund the price on their own.
Can you do an MBO without a private equity fund?
Yes, when the price is compatible with the managers' investment, the bank debt that can be raised and any vendor financing. This is common on smaller deals. Beyond that, personal investment is no longer enough and a financial sponsor provides most of the equity; management then keeps a direct stake and, often, an economically leveraged management package.
What is a management package and how is it taxed?
It is the set of instruments — ordinary or preference shares, share warrants (BSA), free shares (AGA), reinvestment — through which management shares in value creation. Since 2025, Article 163 bis H of the French General Tax Code, amended in 2026, governs gains linked to an employee's or executive's role: the line between a capital gain and a benefit linked to one's role depends on how the package is actually structured (justified entry price, risk of loss, no guaranteed return), never on the name of the instrument alone.
What happens if a manager leaves the company during the MBO?
The shareholders' agreement contains leaver clauses. A good leaver (death, incapacity, agreed departure, dismissal without misconduct) has their shares bought back at close to market value; a bad leaver (gross misconduct, breach of the agreement, disloyal departure) suffers a steep discount, sometimes down to cost price, subject to legal validity; an intermediate leaver falls in between. The clauses must be proportionate and aligned with the employment contract.
Can management negotiate the price when it knows the company from the inside?
Yes, but this information asymmetry creates a heightened duty of transparency towards the seller: clean team, separate advisers, an independent approval process, traceability of the information used and, in sensitive cases, an independent valuation or a fairness opinion. A manager who takes part in the sale process while preparing their own offer must formalise how this conflict of interest is managed.
How long does an MBO take, from intention to completion?
Generally between 6 and 9 months: forming the core management team and feasibility analysis, finding the sponsor and lenders, letter of intent, due diligence, parallel negotiation of the SPA, the financing, the shareholders' agreement and the package, then signing and completion. The key point is never to commit to a firm completion before the financing is secured.
What is the exit route for a sponsor-backed MBO?
A sponsor-backed MBO is not a permanent structure: liquidity is planned from the outset, often after four to seven years. The routes are a sale to a trade buyer, a secondary buy-out to a new fund, a gradual buy-back by management, a stock-market flotation for large enough companies, or a recapitalisation. In a second round, management can sell some of its shares and reinvest the rest in the new holding company.
Do you need an exclusive mandate with Collaboration Capital to structure an MBO?
No. Collaboration Capital does not require any exclusivity: you remain free to consult other advisers and to withdraw the mandate at any time. The firm is registered with ORIAS, the French register of insurance and banking intermediaries, under no. 25000696 as an IOBSP broker (intermediary in banking transactions and payment services), and advises on deals from EUR 1 to 200 million.
All our resources
The legal and tax content on this page is given for information, based on the French legislation in force in 2026 (French General Tax Code (CGI) Articles 163 bis H, 212 bis, 216 and 223 A; French Commercial Code Articles L.225-216 and L.227-1; Directive (EU) 2016/1164; French Conseil d'État decisions of 13 July 2021). Each transaction must be validated by the relevant legal, tax, accounting and financial advisers. Collaboration Capital does not guarantee any amount, rate or timescale for obtaining financing.
Have your MBO project reviewed
A first 45-minute conversation with a partner to test whether your project can be financed, calibrate management's investment and the debt the business can carry, compare structures with and without a sponsor, and map the funders available to you — with no commitment.
Reply within 24 business hours
Confidentiality guaranteed — NDA on request
IOBSP broker registered with ORIAS under no. 25000696