Unleashing Cerberus:don’t let your MBOs turn on themselves

Management buyouts can be difficult to manage and do not lead to guaranteed riches. In the face of what appears to be an increasingly difficult market, we examine why MBOs may fail. During the summer of 1997, we collected the opinions of senior directors of lending banks, top venture capitalists and managing directors of MBOs. From their accounts of the MBO process, we conclude that MBOs may not achieve their promise as the process itself can be unstable. We observe that, without significant strategic renewal, three key stakeholders in the MBO arena will pull apart. An analogy might be unleashing Cerberus: three powerful heads working together can indeed represent a formidable force, but should there be a struggle for supremacy between them, the common purpose is subverted

The management buy-out arena:differential slip in a tripartite alliance

The traditional focus on Management Buy-Outs (MBOs) has been upon concluding deals. However, substantial numbers of MBOs fail to exit and this paper suggests that the time is ripe for attention to be redirected towards post-deal evolution. Three phases in the MBO post-deal process are identified. These are depicted as The Spirit of Optimism, The Zone of Indifference and The Spiral of Mistrust, reflecting, respectively, the moment of contractual agreement, subsequent stagnation and downward slide in performance. As the MBO evolves through these phases of decline, this study focuses upon the interactions of three main parties: The Management Team, The Venture Capitalists and The Investment Bankers. The key objective is to capture the difficulties accruing to these parties as the MBO declines. The failures of the three main parties lie in identities, increasing problems of interaction and lack of communication. By linking micro, meso and macro levels of analysis a novel way of looking at MBOs is suggested which helps to avoid the trap of focusing only upon the moment the deal is done

Enacting competitive wars: Competitive activity, language games, and market consequences

This paper has benefited from the comments of David Allen, Avi Fiegenbaum, Luis Martins, Antoaneta Petkova, Rhonda Reger, Kamenna Rindova, and Ken Smith. We also thank Sameer Wadhwa for help with the research on the “cola war ” in the 1980s