The Chinese style management buyouts

A management buyout (MBO) is an acquisition in which a firm’s equity is fully or partially acquired by the incumbent management team, often with the participation of private equity investors. MBOs in China have specific characteristics that differ from other countries. This chapter reviews the historical background and institutional context of these buyouts that are crucial to understanding their causes and consequences. It also reviews the literature to highlight the distinctive features of MBOs in China in comparison to those conducted in Western economies. The chapter discusses the financial and non-financial performance of MBO firms. Most of the Chinese MBOs happened during the era of enterprise reform in China, aiming to help state-owned enterprise to survive the sharply increased competition in the gradually marketized economy. There are marked differences in the motivation of managers, private investors, and facilitators in these buyouts from those that happened in the West.