Company Buyout Money Type Employees Eslpod Leave Buy

Companies may have several types of buyouts. The type of buyout described in this lesson happens when the company pays a "severance package" (a large amount of money and other benefits) to employees who agree to leave the company. By "letting go of" (having employees leave the company) "senior employees" (people who have worked somewhere for a long time) and replacing them with younger employees who have less experience and are willing to work for less money, the company can reduce its costs significantly. This type of buyout is most common when a company is "downsizing" (intentionally trying to become smaller, usually to increase profits).

Buyouts can also refer to times when the "controlling interest in" (ownership of) a company is "transferred" (moved; shifted) to another "party" (person or organization). For example, a "management buyout" happens when the managers in a company "pool" (share) their "resources" (money) to buy the company and own it together. An "employee buyout" occurs when most or all of the employees-not just the management team-pool their resources to do the same thing. An employee buyout is "commonly referred to as" (usually called) an "employee stock ownership plan" (ESOP).

In a "leveraged buyout" an "entity" (company) "borrows" (receives money from a bank with an agreement to pay it back later) money in order to buy a company, and the value of the company is used as "collateral" (the item that the bank will receive if the money is not paid back) for the "loan" (the money that is borrowed from a bank). This type of buyout is sometimes called a "bust-up takeover," especially if the newly "acquired" (purchased) company is broken up and sold in pieces to repay the loan and make a profit.