Management buy-ins in the UK
In the mid-1980s, many UK venture capitalists developed investments in management buy-ins as an extension of their successful interest in the related area of management buy-outs. This paper presents the results of the first survey of the performance effects of a representative sample of 59 management buy-ins. The study reveals substantial restructuring following management buy-ins and also indicates that the performance levels after the buy-in are likely not to meet those originally intended. Extensive changes in product portfolios are reported. Management changes appear to be highly significant. Performance seems to be below that found in studies of management buy-outs and the extent of changes occurring appears to be considerably greater than in buy-outs. There seems in general to have been an underestimation of the extent of likely problems at the time the investment was being appraised, as indicated by the importance of "skeleton in the cupboard" type problems which subsequently emerged. Whilst this might call into question the thoroughness of the institutions' due diligence process, it may also reflect an asymmetric information problem that is greater in buy-ins than in buy-outs. There does appear to be a higher level of monitoring of buy-ins than for buy-outs.
Volume (Year): 20 (1992)
Issue (Month): 4 (July)
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