Into the Next Millennium
Edited by Mike Wright and Ken Robbie
Chapter 10: Sources of venture capital deals: MBOs, IBOs and corporate refocusing
Page 219 10. Sources of venture capital deals: MBOs, IBOs and corporate refocusing Michelle Haynes, Steve Thompson and Mike Wright I. Introduction Management buyouts comprise one of the most important sectors of the UK venture capital industry. In 1995 they accounted for 31 per cent of the number of investments made by venture capitalists and 73 per cent in terms of value (BVCA, 1996). Both of these were a record share of the market. Moreover, a significant proportion of institutions focus exclusively on investing funds in later stage transactions in which buyouts form a major part (Wright and Robbie, 1996a). Within the broad scope of buyout activities, the largest single source of transactions is divestment of subsidiaries and divisions of larger groups, accounting for half of buyouts in 1995 (CMBOR, 1996). In terms of the overall pattern of corporate restructuring, divestments to other organisations and management teams account for 71 per cent of the volume and 33 per cent of the value of all mergers and acquisitions in the UK in 1995. The divestment process is typically part of corporate refocusing programmes involving a reduction in the scope of often unrelated activities by a firm, enabling it to concentrate on its core business. According to a number of authors, refocusing can be understood as an attempt to correct the problems of unsuccessful diversification, most of which occurred in the late 1960s and 1970s (Shleifer and Vishny, 1991). Unlike previous eras in corporate restructuring, the latest emphasis...
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