Management buyouts: An introduction and overview

This chapter provides an overview of the variety and trends in Management buyouts (MBOs) types or organization. It outlines the theoretical perspectives that have been advanced to explain buyouts. From an academic perspective MBOs have been largely viewed through three theoretical perspectives: agency theory, behavioral theory, and an entrepreneurial perspective. Historically, agency theory has dominated our theoretical understanding of MBOs. Although founded in 1986, the germination of the seed that was to become Centre for Management Buyout Research started in 1979 in a conversation between colleagues about divestments between parent corporations. The chapter discusses some general comments regarding the future prospects for MBOs and private equity (PE). Critics argue that PE-backed buyouts are more likely to fail or enter financial distress as a result of the high amounts of leverage taken on at the time of the deal. The chapter also presents an overview of the key concepts discussed in this book.