Firm Rebirth: Buyouts as facilitators of strategic growth and entrepreneurship

Question 1

Revitalization innovation

Answer 1

Involves moderate innovation, such as upgrades, that renew competitive capabilities.

Question 2

Strategic innovation

Answer 2

involves a fundamental or radical reconceptualization of the business. Can encompass products, processes, administration, etc

Question 3

What is the rule of thumb?

Answer 3

Simplifying strategies based on such things as prior experiences, beliefs and perceptions. Characteristic for entrepreneurs it allows them to see opportunities in problems in a unique way.

Question 4

Efficiency Buyouts

Answer 4

When there is separation of ownership and management it often leads to agency problems.

• Low risk
• Low return
• Combination of ownership and management to align incentives, together with monitoring by active investors, is expected to resolve the problems l

Question 5

Revitalization buyout

Answer 5

may emerge when a firm in a weak competitive position can undertake upgrades or incremental innovation to renew competitive capabilities.

• Moderate risk
• Incremental or moderate innovation opportunities

Question 6

Why is high leverage bad for companies?

Answer 6

This may be caused by high amounts of debt

Question 7

Entrepreneurial buyouts

Answer 7

Involve businesses in which strategic innovations are undertaken to exploit growth opportunities. Financiers need to be able to understand the technology sufficiently to assess the investment initially and to monitor it. For this reason, we expect venture capital firms to play an important role in financing entrepreneurial buyouts.

• High Risk
• High Return
• High degree of Innovation opportunities

Question 8

Entrepreneurial release

Answer 8

Business with misalignments of incentives and managerial frustrations prior to a buyout

Question 9

Busted-tech buyout

Answer 9

Technology-based businesses who have run into substantial problems

Question 10

Failure Buyouts

Answer 10

Underperforms because of the mismatch of mindsets and incentive and control mechanisms. Buyout failure may occur as entrepreneurial managers become frustrated with and override financial control mechanisms.

Question 11

IBO

Answer 11

Institutional buy out

Question 12

MBI

Answer 12

Management buy in - An increasing number of buyouts are emerging in technology-based industries.These typically involve the divestment of noncore businesses, where the parent did not understand or have the capability to manage the technology involved.
Involve outside managers

Question 13

MBO

Answer 13

Management buy out – A transaction where the management of a company purchases the assets and operations of a business they manage