Management Buyouts Research Articles

Leaving Russia: Exit Strategies of Foreign Companies

This study involves the compilation of a database detailing the exit of foreign companies from Russia in 2022 and the identification of their primary exit strategies. The current situation is unprecedented in its scale and has no analogues in the history of the Russian economy, therefore, it has not been sufficiently studied yet. A total of 28 industries across 25countries were selected for the initial study. Through an analysis of exit patterns, nine primary strategies were identified, including joint venture exits, soft closings, sales to local buyers, suspension, liquidation, management buyouts, selling shares to partners, carving out to local legal entities, and sales to foreign buyers. The subsequent research stage focusedon the oil and gas industry and examined the cases of its five leading companies: Shell, TotalEnergies, Equinor, Exxon-Mobil, and BP. It assessed both financial and non-financial losses incurred by these companies due to their decisions to withdraw from the Russian market. Financial losses were determined using the Discounted Cash Flow method and theEconomic-Value-Added valuation method, while non-financial factors were assessed through operational indicators such as reserves and oil and gas production. The fundamental value of the above-mentioned companies was shown to comprise to $20.6 billion, $1.1 billion, $0.5 billion, $17.8 billion, and $36.5 billion, respectively. The study revealed that companieswith strategically important and substantial projects in Russia, notably BP and TotalEnergies, pursued a “soft” exit strategy. Despite their decision to exit Russia, these companies continued to receive dividends and effectively retained ownership shares in assets, even though financial statements reflected impairments.

The Disclosure Duty in Management Buy-outs: Focusing on XXX Co., Ltd. Self-Regulatory Rules on Disclosure of Merger and Acquisition Information, Template Version

The Disclosure Duty in Management Buy-outs: Focusing on XXX Co., Ltd. Self-Regulatory Rules on Disclosure of Merger and Acquisition Information, Template Version

25 Years Ago May 1998

Mills Manufacturing Technology in management buy-out; Brown & Sharpe celebrates 165th anniversary; Barnsley could be the centre of the revolution of intelligent CNC; traditional toolholding fighting back; and aerospace set for turbulent times

Exit decision for social venturing entrepreneurs: A conjoint-based study

ABSTRACT In this paper, we seek to study four options of exit decisions and strategies for Social Venture Entrepreneurs. Due to the small number of practicing Social Venture Investors and Entrepreneurs currently using the Social Venture Entrepreneurship model, data were collected from a heterogeneous group of founders and managers of social ventures across the Netherlands, sub-Saharan Africa, the United States and Asia. The study relies on a conjoint experiment on exit scenarios in which respondents were asked to decide on exit decisions they regarded as preferred or most probable under various conditions. Results from the descriptive analysis show that the founders are highly unlikely to exit. In the event of exit, Mergers and Acquisition (M&A) and Management Buy-out (MBO)/Internal Succession (IS) are the most preferred and probable exit routes that these founders are likely to take. Results from the conjoint analysis indicate that social impact is the most important factor in the decision of the founder of social ventures to exit. This study contributes to the broadening of our understanding on which exit decision models and strategies are likely to hold and become sustainable for practicing Social Venture Entrepreneurs.

Exits, Performance, and Late Stage Private Equity: The Case of UK Management Buy-outs

Exits, Performance, and Late Stage Private Equity: The Case of UK Management Buy-outs

Management buyouts in times of economic policy uncertainty

Using a sample of 18,225 global buyouts, we find that management buyouts (MBOs) are significantly more likely to occur if economic policy uncertainty (EPU) increases. This finding is consistent with the idea that EPU provides an opportunity for insiders to capitalize on private information and time the market. Further results suggest that market timing pays off on average. We find that MBOs achieve more favorable buyout prices and greater post-buyout operating improvements than institutional buyouts during times of high EPU. Our results hold when exploiting close national election races as a quasi-natural experiment for EPU.

IMPACT OF MERGER AND ACQUISITION ON FINANCIAL PERFORMANCE OF TCS AND CMC

Corporate restructuring is redesigning of business. It can be done through expansion techniques, divestment techniques and many other techniques. Expansion techniques includes Merger and acquisition, takeovers, strategic alliances, joint ventures while divestment techniques includes methods such as demergers, hive off, slump sale, leverage buyout, management buyout or liquidation. Merger means consolidation of two or more companies into one company, whereas in acquisition one company acquires another one. The motive behind mergers and acquisition is to create synergies. Here the focus is on IT companies. IT is always a booming sector. Information technology is used in all sectors nowadays, that’s why it is considered as backbone of all sectors. The main aim of present paper is to analyze the impact of merger and acquisition on financial performance of the IT companies in India. The paper presents the case of merger and acquisition of TCS and CMC. The data is collected from secondary sources. These have been collected from companies official website, Bombay stock exchange, journals, articles and online available sources. Financial ratios were employed for data analysis. The finding indicates that there is no significant improvement is observed.

Pioneering management buy-out and entrepreneurial finance research: Mike Wright’s research legacy

Pioneering management buy-out and entrepreneurial finance research: Mike Wright’s research legacy

Management Buy-Out (MBO) of the shares of a Russian Company with limited liability (OOO)

The article presents the advantages of MBO transactions of the shares of Russian limited liability companies (OOO) in comparison with such alternatives like leaving the Russian market through sale of shares to a third party or voluntary liquidation of the company. In addition, the article introduces the main stages in the structuring of MBO transactions and draws attention to essential and potentially problematic issues that can arise during the process, such as obtaining the necessary permits for the transaction in accordance with the recent changes in Russian legislation or choosing the most suitable applicable law and jurisdiction. All the above-mentioned considerations allow to implement appropriate legal mechanisms to protect the interests of all parties to the transaction and to structure the deal to the maximum benefit of each of them.

Management buyout for Grundfos's Enaqua

Management buyout for Grundfos's Enaqua

Management buyout for Grundfos's Enaqua

The Enaqua management team is to acquire the UV water treatment company from Grundfos.

Operating Performance of Management Buyouts: Non-PTP Dimension of Acquisitions

This paper investigates value creation in a unique sample of 412 private firm and divestment management buyouts. Performance of buyouts is tested within Jensen’s agency framework, which posits mitigation of agency conflicts through buyout. Results indicate that last decade management buyouts are characterised by low leverage, high growth and moderate profitability. Post-transaction performance is superior to comparable non-buyouts, however buyouts begin to outperform control firms prior to acquisition and pre-to-post transaction performance improvements are minimal. Leverage is a significant driver of performance despite being low and private equity sponsors generate little additional value after controlling for selection bias.

Going Private Transactions and Firm Innovation: Evidence from Japanese Management Buy-outs

This paper empirically examines the impact of exiting the stock market on corporate innovation activities using Japanese going private type MBO data. Difference-in-differences analysis in regression framework is implemented on panel data consisting of firms that conducted public-to-private MBO and matched firms. Also, hypotheses regarding ex-post firm innovation activities are tested using difference-in-difference-in-differences analysis. The results do not show significant effects of going private transactions on firm innovation activities among the whole MBO firms. However, I find that firms with low ex-ante debt ratios are suppressed in their ex-post innovation activities, which suggests the existence of debt overhang, where the increased debt caused by MBO inhibits innovation activities.

The Legacy of the Dean of Management Buy-out and Entrepreneurial Finance Research

This paper reviews 133 of Mike Wright’s contributions to the management buy-out and entrepreneurial finance literature. The outline is chronological and subject-related, revealing the development of Professor Wright’s scholarly work over time and its variety. We begin with the emergence of buy-outs, a discussion of agency costs and corporate governance issues. We then move to internationalisation, boom and bust, Mike's acknowledgement of the arrival of active investors, emerging markets, deal structuring, syndication, new venture finance, financial and economic performance, and recent developments. We document the legacy of an abundant scholar and provide, thanks to his outstanding academic impact, guidance on the evolution of management buy-out and entrepreneurial finance research since its inception.

The performance of majority MBOs: An investigation on European SMEs controlled by their managers

This article investigates the impact of a majority management buyout (majority MBO) on the evolution of growth, performance and the level of employment of European SMEs. The empirical study is based on an original sample of 178 majority MBOs in Europe over the 2000-2007 period that is the golden age of LBO in Europe. The results show opposite trends between targets companies in the UK and continental Europe. British targets exhibit higher performance and employment level unlike European companies for which the results are not statistically significant compared to the control sample. The results also indicate that divisional majority MBOs perform better than private-to-private acquisitions. However, the role of PE funds remains unclear to explain the post-buyout trends in terms of performance and employment.

Minority shareholder treatment surrounding the Dell MBO

PurposeThis paper is a clinical examination of the October 2013 Management Buyout of Dell Inc. by founder Michael Dell and Silver Lake Partners for a total consideration of $13.88 per share. The proposed transaction was targeted by shareholders unhappy with the deal price and voting framework. Various shareholders went on to file an appraisal suit. Examining these events yields insights into shareholder rights issues in a major transaction.Design/methodology/approachThe paper examines events surrounding the acquisition including the negotiation process, go-shop period, shareholder activist demands for a higher price, shareholder voting and the subsequent appraisal trial and appeal.FindingsDespite suggesting Dell's board fulfilled its fiduciary duties, Delaware Vice Chancellor Travis Laster awarded petitioning shareholders $17.62 per share, a 27% premium to the final deal consideration. This article draws on Laster's decision and research examining topics raised by the surrounding events to argue minority shareholder interests were not sufficiently protected.Research limitations/implicationsThe Dell transaction represents only one data point. Moreover, Vice Chancellor Laster's decision was reversed on appeal.Originality/valueNevertheless, the paper discusses the nuances surrounding many issues of interest to practitioners involving large going private transactions. It could also be used to illustrate many “real world” perspectives in an advanced corporate finance or mergers and acquisitions class.

Apex Pumps sold in management buyout

UK pump manufacturer Apex Pumps founder and main shareholder Nick Sole has sold the business and assets of Apex Fluid Engineering Ltd and Precision Alloys Ltd in a management buyout deal.

Fight or flee: Outside director departures prior to contested management buyout offers

AbstractResearch Question/IssueWe investigate outside director departures prior to management buyout offers (MBOs). In these transactions, managers have both an information advantage and incentives to make a lowball offer to shareholders. Outside directors can safeguard against managerial self‐dealing by negotiating for the best terms for public shareholders from either management or another bidder.Research Findings/InsightsIt is typical that outside directors stay on the board through an MBO offer as MBOs are less likely to have changes in directors—either joining or leaving—relative to a control sample. After controlling for endogeneity as well as firm and director characteristics, we find that outside directors are more likely to leave when the offer is later contested. We do not find any evidence that departing directors are replaced by new outside directors who ensure shareholders get a higher premium nor do we find any evidence that the board acts as a public auctioneer. We also find that outside directors are more likely to depart when the buyout contest is longer. Our findings show that outside directors provide a weak internal monitoring mechanism as they leave precisely when shareholders need their expertise the most.Theoretical/Academic ImplicationsOur results contribute to research that supports the notion that outside director departures are symptomatic of board weakness. The results of our study support the contention of other researchers that outside directors often fail to monitor managers.Practitioner/Policy ImplicationsOur study offers useful information to M&A investment banking advisors and leverage buyout analysts by showing the mechanisms under which director turnover can affect the value and the outcome of MBOs.

Public‐to‐Private Buyouts and Innovation

AbstractWe study the effect of public‐to‐private buyout transactions on investments in innovation using an international sample over the 1997–2017 period. We use patent counts and citations to proxy for the quantity, quality and economic importance of innovation. Our results are based on time analysis and matched sample regressions. The data indicate that buyouts are associated with a significant reduction in patents and patent citations, including a reduction in radical (i.e. more scientific) patents. When we split the sample into institutional and management buyouts, the negative effect of buyouts is confirmed only for institutional buyouts. This suggests that only institutional buyouts prevent target firms from adopting long‐term investments. This finding is confirmed by reductions in innovator employment and innovation efficiency subsequent to going private. Moreover, the data indicate that the negative effect is most prevalent for transactions where the cost of the deal's debt financing is higher than that of the debt post‐buyout. We rule out some alternative explanations for these findings, including but not limited to outliers, truncation bias and endogeneity.

Director and Officer Duties in Management Buyouts: A Comparative Assessment

This chapter comparatively assesses U.S. and U.K. law governing management buyouts (MBOs), focusing on the duties of directors and officers in these systems. The analysis casts doubt on persistent but mistaken perceptions about U.S. and U.K. corporate fiduciary duties for self-dealing. The U.K. no-conflict rule is seen as strict, the U.S. fairness rule as flexible and pragmatic. As the analysis for MBOs demonstrates, these fiduciary rules operate similarly, tasking neutral or disinterested directors with policing self-dealing, enabling commercially sensitive responses to conflicts of interest. The analysis also reveals stronger formal private enforcement of corporate law and more robust disclosure rules in the United States. But because the available empirical evidence fails to justify broad claims that corporate fiduciaries’ misconduct is more severe under either regime, the analysis identifies U.K. law-related measures that may serve similar functions to formal enforcement and mandated disclosure in constraining misconduct by corporate fiduciaries. These include informal enforcement by the U.K. Takeover Panel, stronger shareholder rights, and potentially greater monitoring by institutional investors.