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.