George P. Kyprianides (The University of Reading) and Leoni Kyprianidou (The University of Reading) have posted “Management Buy-Outs a Hollywood Movie with a Great Ending?“
The abstract is as follows:
Management buy-outs (MBOs) are one segment of business that could make a great movie. The reason being that in many occasions they consist of the drama of tough and tense negotiations as well as the stress of trying to raise a great deal of money. As if this was not enough, there is a nerve-wracking race to meet the ostensibly unattainable deadline. If one adds to all the above the philanthropic aspect that management buy-outs have in honoring loyal staff and preventing unemployment then it has all it needs to comprise a great movie.
However, management buy-outs are (generally) risky to finance through a loan so there are two other forms that this funding can take. Namely, vendor financing and financing via Private Equity. The latter is imperative for the purposes of this article as it refers to finance provided by either institutions or individuals while in return they will receive shares in the company and in this way influence its strategy.
This article will demonstrate that MBOs is not at all an easy process and thus some issues should be thought of very seriously before it is carried on. In doing so, we will discuss the key legal issues and their connection with core commercial considerations paying particular attention to corporate control and financial structure.
The main question which is answered in this paper is Success for Whom? Since an MBO could have different interpretations as to its success or failure from different viewpoints.