Sample Management Buyout Agreement

A sample management buyout (MBO) agreement outlines the terms and conditions of a management-led acquisition of a company. This agreement is a legally binding contract between the management team and the owners of the company being acquired. It is crucial to have a well-drafted MBO agreement to protect the interests of both parties and ensure a smooth transition of ownership.

Here are some key points to consider when drafting a sample MBO agreement:

1. Purchase price: The MBO agreement should specify the purchase price of the company`s shares, which includes the consideration paid by the management team for the ownership stake.

2. Payment terms: The payment terms of the purchase price should be clearly outlined in the agreement. This includes the payment schedule, details of any financing arrangements, and the consequences of any non-payment or breach of agreement.

3. Management responsibilities: The agreement should specify the responsibilities of the management team after the acquisition, including management structure, reporting lines, and decision-making processes.

4. Non-compete and non-solicitation clauses: These clauses restrict the management team from competing with the company or soliciting its customers or employees for a set period after the acquisition.

5. Due diligence and warranties: The agreement should contain provisions for due diligence, including disclosure of any material information related to the company`s business, finances, and legal affairs. It should also include warranties and representations by the owners regarding the company`s assets, liabilities, and financial condition.

6. Dispute resolution: The MBO agreement should specify the process for resolving disputes between the management team and the owners. This can include mediation, arbitration, or litigation.

In summary, a well-drafted MBO agreement is critical to the success of a management-led acquisition. It protects the interests of both parties, sets clear expectations, and provides a framework for resolving disputes. If you are considering an MBO, it is essential to consult with an experienced attorney to ensure that your agreement is legally sound and meets your needs.