Management buy-in

[PassOrNothing]

For the following question, I do not fully understand the meaning behind “capable managers.”

Q) A leveraged buyout fund is evaluating Company A relative to its peer companies. Comp A is most likely a good candidate for a mgmt buy-in if it has:

A) higher cash flow and less capable managers than its peers.

• In management buy-in, is it Company A’s management buying in? If so, then the the management is “less capable” than its peers so shouldn’t more qualified people take over? I’m guessing that management buy-in is a 3rd party?

[laksh]

Management buy-in is when a third party or outside management replaces the current management. In this case, it qualifies as the company has less capable managers than its peers.

[edupristine]

@PassOrNothing

For the following question, I do not fully understand the meaning behind “capable managers.”

Q) A leveraged buyout fund is evaluating Company A relative to its peer companies. Comp A is most likely a good candidate for a mgmt buy-in if it has:

A) higher cash flow and less capable managers than its peers.

• In management buy-in, is it Company A’s management buying in? If so, then the the management is “less capable” than its peers so shouldn’t more qualified people take over? I’m guessing that management buy-in is a 3rd party?

In this situation buying company feels that the company has a very good potential but they has a less capable managers. They change the management after buying in.