Management buy-out: buying the company you work for

Quick answer. Buying the company you work for (a management buy-out, or MBO) usually relies on an acquisition holding that borrows, buys the shares and repays the debt with dividends paid up at a 95 % tax exemption (parent-subsidiary regime, articles 145 and 216 of the French Tax Code). The buyout tax credit of article 220 nonies expired on 31 December 2022.

You know the company better than anyone: its clients, its margins, its weak spots. When the owner nears retirement or looks to step back, the manager or employee already in place is often the most credible buyer. The challenge is turning that knowledge into a financeable, tax-secure deal.

An internal buyout, or management buy-out, is a deal apart: you don't have the cash to pay the price upfront, but you hold a rare asset, the seller's trust and full command of the file. At Hayot Expertise, a firm registered with the Ordre des experts-comptables of Île-de-France, we regularly handle these business transfer and buyout files, from the first talk with the seller to closing.

This article takes the employee-buyer's view. For the same deal seen by the selling owner, read the same deal seen from the seller's side.

A management buy-out is the purchase of a company by one or more of its managers or employees, usually through a holding company set up for the occasion. The buyer contributes part of the price as equity, the holding borrows the balance, and the debt is repaid by the dividends the acquired company pays up each year.

The MBO differs from an external buyout on three points: the information asymmetry works in your favour, the relationship of trust with the seller already exists, and operational continuity reassures banks, clients and staff. It is also a leveraged deal: it becomes an LBO when debt structures the acquisition.

The building blocks#

1. Approaching the seller: state your interest, understand price and timing expectations, sign a confidentiality agreement.
2. Valuation: set a reference price and justify it (see the three valuation methods for a company).
3. The acquisition holding: a dedicated company that carries debt and shares.
4. The financing plan: personal equity, senior bank debt, seller's credit, guarantees.
5. Legal and tax security: the sale agreement, asset and liability warranty, the tax regime of the structure.

Your position as an employee is ambivalent. You know a lot, but you are not meant to negotiate by exploiting confidential information obtained through your employment contract. Frame the discussion: a statement of interest in principle, a signed confidentiality undertaking, then organised access to data within a proper buyer's due diligence.

Our reading. In internal buyout files, the sticking point is rarely the price itself but the gap between the emotional value the seller attaches to the company and the value its profitability can finance. A holding can only repay what the company actually generates in distributable cash. A price set too high kills the deal before the bank even looks at it.

Valuation draws on several approaches (profitability, multiples, revalued net assets). For the buyer, the point is to tie the price to repayment capacity: that is the whole purpose of valuing the target and building the financing plan.

Buying directly, in your own name, forces you to repay the loan with already-taxed income. The acquisition holding reverses the logic: it borrows, holds the shares, and the acquired company pays it dividends used to repay the debt. This is the heart of the leverage effect. The full mechanism is detailed in our guide on setting up an acquisition holding to buy an SME.

Two regimes make the deal efficient:

Concretely, if the holding owns the whole target, tax consolidation lets it pass up dividends bearing only a 1 % share and offset the holding's loss (from the interest on debt) against the target's profit. The leverage logic is explored further in our article on structuring the leverage of an LBO.

An employee-buyer rarely has the equity of an investment fund. Financing is built in layers.

The seller's credit deserves particular attention. It aligns interests: a seller who accepts staged payment signals confidence in the company's future. For the seller, the capital gains tax can, subject to conditions, be spread (article 1681 F of the Tax Code), notably for companies with fewer than 50 employees not exceeding 10 million euros in balance sheet or turnover, up to the end of the fifth year after the sale. Note: this spreading concerns the payment of the tax, not its base, the gain remains taxed in full in the year of sale.

This is the most important point to clarify. The tax credit under article 220 nonies of the Tax Code, which benefited the holding set up to buy a company through its employees, applies only to buyouts carried out up to 31 December 2022. It is no longer available for later deals and has not been renewed to date.

The underestimated risk. Many online articles and business-plan templates still present this tax credit as an active benefit. Building a financing plan around it distorts the whole structure. We flag it systematically: under the law as it stands in 2026, this lever no longer exists. Until a finance act reinstates it, treat it as a historical measure, not a resource.

For the record, the measure required a new company subject to corporate income tax, employees present for at least 18 months and a company agreement; the credit was capped at the interest on the buyout loan. These conditions have no practical effect today.

Two anti-abuse mechanisms govern the leverage effect and must be anticipated from the modelling stage.

• The limit on net financial charges (article 212 bis of the Tax Code), known as the ATAD cap: the deduction of acquisition loan interest is capped above 3 million euros of net financial charges or 30 % of tax EBITDA. On a modest SME, the 3 million threshold is rarely reached, but the calculation must be done.
• The Charasse amendment (article 223 B of the Tax Code): it neutralises the interest deduction in a buy-from-oneself within a consolidated group. A standard MBO by employees from a third-party seller is not concerned, but the structure must be checked wherever pre-existing capital links exist.

What the tax authorities look at. The consistency between price, financing and the target's real distribution capacity; the effectiveness of the holding (real activity, substance); compliance with the holding and duration conditions of the parent-subsidiary and consolidation regimes. A purely tax-driven structure, with no economic logic, is fragile.

Recently, an operations director of an industrial SME asked us to help buy the company from his retiring employer. His equity covered a minority share of the price. We built the plan around a tax-consolidated holding, senior bank debt and a three-year seller's credit, ruling out from the start any assumption of a 220 nonies tax credit. The central trade-off concerned the level of sustainable dividends: the target needed enough left to invest while servicing the debt. Sizing the seller's credit prudently allowed the financing to close without choking operating cash flow.

1. State your interest to the seller and sign a confidentiality agreement.
2. Carry out a valuation and set a price range tied to repayment capacity.
3. Conduct due diligence to confirm profitability and hidden liabilities.
4. Set up the acquisition holding and arrange the funding round (equity, debt, seller's credit, guarantees).
5. Choose the group's tax regime (parent-subsidiary or consolidation depending on the percentage held).
6. Negotiate the sale agreement and the asset and liability warranty.
7. Clear the conditions precedent (bank agreement) and sign the closing.