Series 79 practice questioneasyManagement Buyouts
In an MBO, which of the following is a common way for management to demonstrate alignment with new equity owners?
- ASigning a non-compete agreement
- BProviding a fairness opinion
- CRolling over some of their existing equity into the new ownership structure✓ Correct answer
- DServing as advisors to the special committee
Explanation
Why C — Rolling over some of their existing equity into the new ownership structure
Management often rolls over equity to show commitment to the company's future performance. This creates shared interests with the new owners, unlike fairness opinions or advisory roles.
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