Employee Buyout (EBO) - Explained
What is an Employee Buyout?
Written by J. Mance Gordon
Updated at April 20th, 2024
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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.