Question 1a
Answer

A management buy-out (MBO) involves the purchase of a company by the management running that company. Hence Burgut Co’s current management team would be buying Burgut Co from Opao Co.

A management buy-in (MBI) involves selling Burgut Co to a management team brought in from outside the company.

Opao Co may have sold Burgut Co through a MBI for the following reasons. Opao Co’s BoD may have felt that Burgut Co’s current management team lacked fresh ideas and strategies which could have driven Burgut Co forward successfully.

Instead, it may have felt that a fresh team, with skills and expertise gained externally, would have had the required innovative ideas and skills.

It may be that the external team of managers may have had the finance available to move quickly, whereas the internal team of managers may not have had the finance in place to purchase Burgut Co at that time.

It is also possible that the management teams within Burgut Co and Opao Co had disagreements in the past, and Opao Co’s BoD may have believed the two management teams would not be able to work together in the future, if needed.

Thus, the BoD may have felt that a fresh management team was the better option going forwards.