The use of management buyouts as an aspect of corporate strategy in Britain

Management buyouts (MBOs) have become increasingly popular in Britain in recent years and although much has been written about the motivation of the acquiring managers‐entrepreneurs and the sources of finance for the buyouts the reasons behind the sale of the firms through this process have remained unexplored. In this article, the main reasons for MBOs taking place are considered. It is argued that where the MBO is of a division/SBU (Strategic Business Unit) from a surviving firm then it forms part of that firm's corporate strategy. The article examines the view that divisions/SBUs operating in declining industries and those that no longer fit into the firm's overall strategy are the most likely to be disposed of through MBOs. It also considers the extent to which the managements of the divesting firms are acting in a reactive or proactive way and illustrates the benefits of using MBOs proactively as part of corporate strategy.