Monday, July 06, 2009

Private equity buy-ins

A study by the Credit Management Research Centre at Leeds and the Centre for Management Buy-Out Research in Nottingham, suggests that buy-ins are much more risky that buy-outs.

The study also found that private equity deals are more likely to fail when outsiders are brought in to run a company (management buy-ins) than when done with the support of existing managers (management buy-outs).

“Buy-outs have a higher failure rate than non-buyouts, with MBIs having a higher failure rate than MBOs, which in turn have a higher failure rate than private equity-backed buyouts,” it said.

“However, MBOs and private equity-backed deals completed post-2003 are not riskier than the population of non-buy-outs if we control for other factors.”

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