MBO, MBI and LBO Advisory

What a Management Buyout in France Actually Involves

A French management buyout is built around four moving parts: the NewCo holding, the equity and debt stack, the SPA on the target shares, and the post-completion tax election under intégration fiscale. Each part has French specifics that the design must anticipate.

NewCo structuring

The acquisition vehicle is almost always an SAS — chosen for governance flexibility, share-class architecture (ordinary, preferred, ratchet, sweet equity) and the 0.1% registration duty cap on share transfers (against 3% for an SARL parts sociales above the €23,000 abatement). The NewCo is capitalised by the sponsor’s equity, the management’s roll-over and personal investment (typically through a ManCo SAS or a société civile), and the senior debt drawn at closing. Statutes set the leaver provisions (good leaver / bad leaver), the exit waterfall and the drag-along / tag-along mechanics.

Equity stack

The equity comes from three sources: the financial sponsor (institutional investor), the management team (rolled-over shares plus new investment), and occasionally a co-investor or a family office. The management package is typically a mix of ordinary shares carrying ratchet (relution) on outperformance, and bons de souscription d’actions (BSA) or actions de préférence sized so that — under defined IRR thresholds — managers participate in a defined share of value creation. The tax treatment of the management package is the single most negotiated item: the BOFiP doctrine on management packages (BOI-RSA-ES-20-10-20) and the Conseil d’État case law of 13 July 2021 frame the boundary between capital-gains tax treatment (30% PFU plus 4% contribution exceptionnelle where applicable) and re-characterisation as employment income (taxed at marginal rates plus 9.7% CSG-CRDS).

Debt stack

Senior debt is provided by a syndicate of French and international banks or — more frequently in the current market — by a private credit fund providing unitranche financing. The senior is sized at four to six times EBITDA depending on sector, supplemented by mezzanine, PIK or vendor financing where the gearing exceeds the senior bank appetite. The senior interest cost is deductible at NewCo level — subject to Article 212 bis CGI thin-capitalisation and the 30% of tax EBITDA cap under the EU Anti-Tax-Avoidance Directive transposition.

SPA and completion mechanics

The SPA on the target shares is negotiated alongside the financing documentation (the Senior Facility Agreement or unitranche facility). Completion accounts vs locked box, working capital peg, debt-and-cash schedule and W&I insurance perimeter are calibrated to the bidder process.

French Tax Specifics of a Management Buyout

Tax design drives the economics of a French MBO. The recurring questions:

• Intégration fiscale — the NewCo and the target are integrated under Article 223 A Code général des impôts, allowing the senior debt interest to be deducted against the operating EBITDA of the target. The integration requires 95% ownership and a 5-year renewable election.
• Régime mère-fille — dividends from the target up to NewCo are 95% exempt under Article 145 CGI, leaving an effective tax of approximately 1.25% on intra-group cash sweeps.
• Amendement Charasse (Article 209 IX CGI) — restricts interest deduction at NewCo level where the buyer acquires the target from a related party still in control of NewCo. The provision is the single most-asked item in a French MBO and must be analysed at scoping.
• Thin-cap rules (Article 212 CGI and Article 212 bis CGI) — limit deductible interest where related-party debt exceeds 1.5 times equity, and cap overall net financing cost at the higher of €3 million or 30% of tax EBITDA, with sector exceptions.
• Long-term capital gains on exit — disposal of the titres de participation held by NewCo for at least 2 years is 88% exempt from CIT, leaving an effective rate of approximately 3% (the 12% quote-part de frais et charges taxed at 25%).
• Management package treatment — the boundary between capital gains and salary is set by BOFiP doctrine and Conseil d’État case law. A 13 July 2021 ruling clarified the criteria; a careful design and clean documentation are essential.

These items shape the equity-debt ratio, the dividend policy, the holding period and the exit structure — and explain why a French MBO is structured by an expert-comptable working alongside the M&A counsel and the deal lawyer.

Management Buyout in France vs Internationally

A French management buyout differs from its UK or US equivalent on five points.

The differences explain why a sponsor or a management team relying on UK or US precedent without French structuring frequently misprices the deal — the amendement Charasse trap and the management-package re-characterisation risk are the two most common findings on a post-mortem review of a failed French MBO.

When a Management Buyout in France Is the Right Choice

Five recurring situations:

• Founder succession — a family-owned French SME is acquired by its incumbent management team, with a PE sponsor providing equity and a senior lender providing debt. The founder gets liquidity, the management team becomes shareholders, and the business stays independent of trade buyers.
• Corporate carve-out — a French subsidiary is divested by its corporate parent to its management team. The MBO/BIMBO often runs alongside a vendor diligence and a TSA covering transition services from the seller.
• Public-to-private — a listed French SME is delisted by its management team and a PE sponsor through a tender offer (offre publique d’achat) followed by a squeeze-out (retrait obligatoire) where the 90% threshold is reached. AMF clearance is required.
• Secondary buyout — a portfolio company is sold by one PE sponsor to another, with the management team rolling over a portion of their package into the new structure. Secondary buyouts now account for a substantial share of French mid-market PE activity.
• MBI on a stressed company — an external management team, often industry veterans, acquires a French company in financial difficulty with a sponsor specialising in turnaround. The structure interfaces with the commercial court procedures (sauvegarde, redressement judiciaire) where the target is already in proceedings.

Each situation calls for a tailored NewCo design — not a template.

The Process: Standard Steps on a French MBO

A typical French MBO runs through the steps below:

1. Scoping and indicative term sheet — agreement on equity quantum, sponsor IRR target, debt envelope, management package, and the perimeter of the diligence work. The financial sponsor issues an indicative offer to the seller.
2. Confirmatory diligence — financial, fiscal, social and operational diligence on the target.
3. Tax structuring — NewCo design, intégration fiscale sizing, amendement Charasse analysis, thin-cap modelling and management-package structuring.
4. Debt syndication and financing documentation — senior facility agreement, intercreditor (where mezzanine is involved), security package (nantissement on the target shares, on receivables, on bank accounts).
5. SPA negotiation — completion accounts vs locked box, W&I insurance, leakage period, conditions precedent.
6. Closing and intégration fiscale election — completion of the transaction, transfer of the target shares to NewCo, drawdown of senior debt, election filed with the DGFiP.
7. Post-completion — opening balance sheet, audit by the commissaire aux comptes (mandatory under the Décret n° 2024-152 du 28 février 2024 thresholds), first-period reporting to the sponsor and the senior lender.

The standard mid-market timetable runs four to six months from term sheet to closing.

The French Regulatory and Advisory Environment

A French MBO is delivered inside a regulated and lawyer-heavy environment.

• OEC — the Ordre des Experts-Comptables regulates the chartered accountants who perform the diligence, the NewCo structuring and the audit interface.
• CNCC — the Compagnie Nationale des Commissaires aux Comptes regulates the statutory auditor that signs the opening balance sheet and the first-period audit report.
• DGFiP — the Direction Générale des Finances Publiques receives the intégration fiscale election and may examine the amendement Charasse position on subsequent enquiry.
• AMF — the Autorité des Marchés Financiers regulates public-to-private transactions and clears tender offer documentation.
• Greffe du Tribunal de Commerce — the commercial court registry holds the NewCo registration, the security filings (nantissement) and the post-closing share-transfer recordings.
• Banque de France — runs the FIBEN database used by senior lenders for credit risk assessment.
• French government — IEF screening applies where a non-EU sponsor acquires a French target in a sensitive sector.

A sponsor or a management team without dedicated French advisors interacts with each of these bodies through counsel — the integrated expert-comptable coordinates the financial, fiscal and audit interface across the full set.

Why Interexco for a Management Buyout in France

Interexco has advised on French MBOs, MBIs, BIMBOs and LBOs for over 40 years, working on the sponsor side, the management side and the lender side. Our partners are based in Paris, with offices in Lille, Milan and Tunis, and we work in English, French, Italian, Spanish and Russian. We are members of the Ordre des Experts-Comptables and registered with the Compagnie Nationale des Commissaires aux Comptes. The combination of regulated standing, sector depth and language coverage is the practical answer to the question every PE sponsor asks at scoping: who delivers the diligence, the structuring, the audit interface and the first-period reporting on one timetable, in the buyer’s language, at French regulated standing?

Bottom Line: When a Management Buyout in France Is the Right Engagement

A French MBO is the right structure when an incumbent or incoming management team acquires a French target with PE backing and senior debt, and the parties need a single advisor that can deliver the diligence, the tax structuring, the NewCo design and the audit interface on a coordinated timetable. The structure brings the management team into ownership, gives the sponsor a clear governance and exit path, and turns operating cash flow into a financing tool through the combination of intégration fiscale and the régime mère-fille. A French MBO is not a UK MBO with a French accent: it is a distinct tax-led structure in which the amendement Charasse, the management-package boundary and the thin-cap rules drive the economics. An experienced French advisor anticipates these items at scoping — and the success of the buyout depends on it.

Frequently Asked Questions

What is a management buyout in France? A management buyout in France (MBO) is the acquisition of a French operating company by its existing management team, usually backed by a private equity sponsor and senior debt, through a newly incorporated holding (NewCo, typically an SAS). The structure runs as a French LBO: NewCo takes on the acquisition debt, intégration fiscale allows the senior interest cost to be deducted against the target’s operating profit, and the régime mère-fille enables 95% exempt dividend up-flows. MBI denotes an incoming management team; BIMBO combines incoming and incumbent managers.

What is the difference between an MBO and an MBI in France? An MBO is acquired by the existing management team in place. An MBI is acquired by an external management team coming in to replace or supplement the incumbents. A BIMBO combines both. The structure of the NewCo, the equity stack and the senior debt is broadly the same; the diligence and the management package are tailored to the team profile and to the assessment of the incoming managers’ track record.

What is the amendement Charasse and why does it matter in an MBO? The amendement Charasse (Article 209 IX Code général des impôts) restricts the deduction of acquisition debt interest at NewCo level where the buyer acquires the target from a related party still in control of NewCo after the transaction. The provision blocks the tax benefit of an intégration fiscale MBO when a controlling shareholder sells to its own NewCo. The position must be analysed at scoping to confirm the senior interest deductibility — and is the single most asked item on a French MBO.

How is the management package taxed in a French MBO? The management package is typically a mix of ordinary shares, ratchet instruments and BSA / actions de préférence. The taxation depends on whether the package qualifies for the capital-gains regime (30% PFU plus 4% contribution exceptionnelle where applicable) or is re-characterised as employment income (taxed at marginal rates plus 9.7% CSG-CRDS). The BOFiP doctrine (BOI-RSA-ES-20-10-20) and the Conseil d’État case law of 13 July 2021 set out the criteria. A defensible position requires clean documentation, genuine risk-taking by the manager, and a price aligned with market value at entry.

How much debt can a French MBO carry? Senior debt typically runs at four to six times EBITDA depending on the sector, the cash conversion and the lender. Total gearing (senior plus mezzanine or vendor financing) often reaches five to seven times. The deductibility of the interest cost at NewCo level is capped at the higher of €3 million or 30% of tax EBITDA under Article 212 bis CGI, with thin-cap rules under Article 212 CGI restricting related-party debt above 1.5 times equity. These caps shape the equity-debt ratio.

Is statutory audit required on the NewCo of a French MBO? The NewCo and the integrated group are subject to mandatory statutory audit when they exceed two of three thresholds: balance sheet ≥ €5 m, turnover ≥ €10 m, 50 employees on two consecutive years, pursuant to Décret n° 2024-152 du 28 février 2024. In practice, all French MBOs of meaningful size cross these thresholds, and the commissaire aux comptes is appointed at the constitutive AGM of the NewCo.