BUYOUT

noun Sometimes written buy-out (Business World) The purchase of a controlling share in a company, either by its own employees or by another company. Etymology: The noun is formed on the verbal phrase to buy (someone) out. History and Usage: The word originated in the US in the mid seventies, when there was a marked rise in company take-overs and tender offers. In some buyout schemes it was the company's own employees who were encouraged to buy up sufficient stock in the firm to retain control; other variants are the management buyout or MBO, in which the senior directors of a company buy up the whole stock, and the leveraged buyout (pronounced /--/: see leverage) or LBO, practised mainly in the US, in which outside capital is used to enable the management to buy up the company. Although originally American, the buyout soon reached UK markets as well; by the mid eighties there were firms of financial advisers on both sides of the Atlantic specializing in this subject alone. Variations on the same theme are the buy-back, in which a company repurchases its own stock on the open market (often as a defensive ploy against take-overs), and the buy-in, in which a group of managers from outside the company together buys up a controlling interest. Leveraged buyouts are commonly used in the United States to defeat hostile takeover bids, but have yet to be successfully tested in Britain. The Times 2 May 1985, p. 21 Latest statistics show buyouts and buy-ins by outside managers running at a record level this year. Daily Telegraph 30 Oct. 1989, Management Buyouts Supplement, p. i Lifting the veil of secrecy was ordinarily enough to kill a developing buyout in its cradle: Once disclosed, corporate raiders or other unwanted suitors were free to make a run at the company before management had a chance to prepare its own bid. Bryan Burrough & John Helyar Barbarians at the Gate (1990), p. 8