so it must be private equity of some sort (at which point they just transfer ownership from large coporate entity to another).
I don’t know howies, but there are different ways to fund a buyout.
Firstly as someone else has suggested if the management team have previously made money from the original exit or other ventures they may have sufficient capital to do it completely.
More commonly they will put in part of the capital and a bank lends the rest. This is probably harder to do since 2008 – but I have heard of this sort of deal still going on last year. Obviously how likely will depend on the assets the company has and the risk of the investment.
Private equity / Vulture capital investment can also provide the money. It could be a straight equity investment but it would be unusual to see it referred to as an MBO then. A PE/VC backed MBO will normally involve a complex mixture of straight equity held by the VC, some sort of loan or agreed buy back terms for the management team on the shares and some form of option / rachet structure that means if the business performs the management get more of the company. Again, in the days when mortgages were easy to come by the management team would probably have remortgaged as well as using their available cash to maximise their chunk of the company up front. The difference between working in a wholy owned subsidiary of a major company and being a significant shareholder in a VC/PE funded stand alone business is quite significant, so whilst it might look like jumping from one corporate master to another – the reality is these guys will only get money in todays climate if they sing from a corporate hymn sheet anyway.
Its also not impossible that Timberland have funded the deal. Basically if they want rid of the company, but don’t need the cash quickly and respect the management team and what they might achieve standalone they may lend to either the company on the management or provide for the exit payments to be trickled out over a prolonged period.
Of course as with all things in corporate finance a single form of funding is not the only answer and it may be a mix of these or even all four.