The pros and cons of privatisation

Article Abstract:

Management and employee buyouts (MEBOs) can provide a more sheltered and gradual step between state ownership and a stock market quotation than a simple privatisation. There has been growing criticism of privatisation in the UK due to steep rises in executive pay and share options, and the poor diversification performance of some privatised firms. MEBOs, where acquisition finance is provided by an institutional investor, with staff and managers also contributing, allows the firm to adapt to the requirements and opportunities in the private sector before seeking a flotation.

United Kingdom, Privatization, Privatization (Business)

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Vendors become drivers

Article Abstract:

The UK management buyout (MBO) industry is increasingly seeing vendor-driven deals where the vendor deals directly with the venture capital firm as financial buyers. This trend is due to the fact that the buyout market has matured, and the fact that venture capitalists have become credible buyers for large businesses. For vendors, dealing directly with venture capitalists instead of with a management team at the business being sold allows them to keep control of the buyout; and to assess the venture capitalist's ability to see the deal through.

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Management teams feel the heat

Article Abstract:

The growing trend in the UK buyout market for vendors to sell a business by financial auction means that incumbent management teams are often prevented from bidding for the business. This is because vendors believe that a higher price may be obtained by encouraging venture capitalists to bid against one another. Vendors may also believe that the existing management have a conflict of interest, between trying to get as much value as possible from the sale and making their own bid successful.

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