MBO - Management’s big opportunity?
August 2025
Tens of thousands of Australian companies are expected to change hands over the coming decade, either because the baby boomer generation is seeking to sell or because other shareholder groups (e.g. private equity or passive shareholders) are looking for an exit. The most logical buyer cohort is management via an MBO, a financial strategy where a company is acquired by management using a combination of debt and equity.
Arrowpoint is proud to support Australian and New Zealand mid-market businesses achieve their goals, providing the flexible and strategic funding required to realise their growth, succession and ownership transition ambitions.
We are currently witnessing increased activity in the management buyout (MBO) market and believe this trend will continue for many years to come.
Let’s explore the pros and cons for management teams who may be considering or navigating this process.
Pros:
Smoother Transition: Management is usually best-placed to buy the company they know intricately, thereby limiting due diligence requirements, a drawn-out sales’ process and transition risk.
Financial Upside & Incentives: Management often receives a significant equity stake in the company, meaning the team stands to benefit financially if the company performs well.
Increased Control: Management would have more autonomy in decision-making with a focus on debt reduction, efficiency and enhanced control.
Funding: Potential funders take greater comfort with management involvement, alignment and investment. Company performance and relative capital contributions (debt and equity) would dictate funding terms.
Cons:
Higher Debt: The company takes on greater debt to fund an MBO, meaning management is to ensure consistent cash flow to service the debt.
Tighter Accountability: The need to meet debt obligations may require management to focus on short-term cash flows rather than long-term growth, which can impact decision-making.
Despite potential challenges, an MBO offers a (sometimes once-in-a-lifetime) chance for management to transform the company for which they work into something they can truly call their own, while potentially reaping significant economic rewards.
It is Management’s Big Opportunity.
If you’re a business owner or management team exploring an MBO, reach out to Arrowpoint to discuss how we can support your journey.
Arrowpoint Capital provides flexible and purpose-driven debt and hybrid debt solutions to mid-market companies in Australia and New Zealand. Our funds provide attractive, regular cash income to investors. To learn more, visit www.arrowpointcapital.com.au