Management Buyout Agreement for the United States

Management Buyout Agreement Template for United States

A Management Buyout Agreement is a comprehensive legal document used in the United States that governs the purchase of a company by its existing management team from current owners or shareholders. The agreement outlines the terms and conditions of the transaction, including purchase price, payment structure, warranties, representations, and post-completion obligations. It typically incorporates provisions for financing arrangements, employee matters, and various regulatory compliance requirements under U.S. federal and state laws.

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What is a Management Buyout Agreement?

The Management Buyout Agreement is utilized when a company's existing management team seeks to acquire ownership from current shareholders. This complex transaction document addresses various aspects including share transfer, financing arrangements, employee matters, and ongoing business operations. Under U.S. jurisdiction, it must comply with federal securities laws, state corporate laws, and relevant regulatory requirements. The agreement typically includes detailed provisions for purchase price mechanics, warranties, representations, conditions precedent, and post-completion obligations, making it essential for both parties to have comprehensive legal representation throughout the process.

What sections should be included in a Management Buyout Agreement?

1. Parties: Identifies all parties involved in the MBO, including current owners, management team buyers, and any financing parties

2. Background/Recitals: Sets out the context of the transaction and current ownership structure

3. Definitions: Defines key terms used throughout the agreement

4. Purchase Price and Payment Terms: Details the transaction value and payment structure

5. Conditions Precedent: Lists conditions that must be met before completion

6. Completion Mechanics: Details the steps for executing the transaction

7. Warranties and Representations: Standard warranties from both sellers and buyers

8. Covenants: Ongoing obligations of all parties

What sections are optional to include in a Management Buyout Agreement?

1. Employee Matters: Required if employment terms are changing or if TUPE applies. Used when employee contracts are being transferred or modified

2. Financing Arrangements: Details of external financing structure. Used when external funding is part of the MBO

3. Non-Compete Provisions: Restrictions on selling shareholders. Used when sellers might compete post-completion

4. Earn-out Provisions: Structure for additional payments based on performance. Used when part of purchase price is contingent on future performance

What schedules should be included in a Management Buyout Agreement?

1. Share Capital Structure: Details of company's share capital pre and post-completion

2. Properties Schedule: List of company properties and related matters

3. Material Contracts: Key business contracts requiring consent or notification

4. Intellectual Property: Schedule of IP rights owned by the company

5. Employee Information: Details of key employees and their terms

6. Completion Documents: List of documents required at completion

7. Warranties: Detailed warranties given by sellers

8. Disclosure Letter: Exceptions to warranties

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

United States

Publisher

Genie AI

Cost

Free to use
Relevant legal definitions
Clauses
Industries

Securities Acts: Securities Act of 1933 and Securities Exchange Act of 1934 - Crucial for transactions involving securities, regulating the offering, sale, and trading of securities

Hart-Scott-Rodino Act: Antitrust legislation requiring companies to file pre-merger notifications for large transactions to prevent monopolistic practices

Internal Revenue Code: Federal tax regulations governing the tax implications of the buyout, including treatment of proceeds, stock options, and capital gains

ERISA: Employee Retirement Income Security Act - Protects employee benefits and pension plans during ownership transitions

State Corporation Laws: State-specific regulations governing corporate operations, mergers, and acquisitions within the state's jurisdiction

Blue Sky Laws: State-specific securities laws regulating the offering and sale of securities to protect investors from fraudulent activities

State Contract Laws: State-specific regulations governing the formation and enforcement of contracts, including purchase agreements

State Employment Laws: State-specific regulations protecting employee rights and governing employment relationships during ownership transitions

SEC Regulations: Federal regulations governing public companies, including disclosure requirements and trading rules

Uniform Commercial Code: Standardized set of laws governing commercial transactions, particularly relevant for asset transfers and security interests

Sarbanes-Oxley Act: Federal law establishing enhanced standards for corporate governance and financial disclosure for public companies

Delaware General Corporation Law: Comprehensive body of laws governing corporate affairs in Delaware, often relevant as many companies are incorporated there

Fraudulent Transfer Laws: State laws preventing the transfer of assets to defraud creditors during corporate transactions

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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