This paper investigates the motivations for and consequences of including a broad group of employees in leveraged buyouts. We compare employee buyouts (EBOs) to buyouts where only top level management participates (MBOs). We find that the pre-buyout characteristics of EBOs and the structure of these transactions are consistent with predictions about the costs and benefits of employee participation both from a labor contract and corporate finance perspective. EBOs tend to occur in poorly performing firms with lower pre-buyout debt capacity and in circumstances where employees are more likely to be concerned about the appropriation of their firm-specific capital. Consistent with an effort to control the costs associated with employee ownership, EBOs tend to have lower employee risk-bearing costs and employees are given limited control rights in the early post-buyout years.