Harvesting and the longevity of Management Buy-outs and Buy-Ins Flashcards
Buy-out
Involves incumbent managers, in acquiring a significant equity stake.
Buy-in
Involves external managers, as individuals with institutional support, acquiring control of the company
Harvest
involves a reduction or a termination of investments in a product, product line, or line of business so that the entities involved can reap—or, harvest—the maximum profits. Usually employed towards the end of the lifecycle
Closed-end fund
IPO but without further share dilution.
Equity-ratchet
management’s equity stake can rise (or possibly fall) if they meet (or fail to meet) harvest targets within a given period of time
Living Dead investments
Very low but realistic valuation so that it then does not matter significantly whether harvest occurs or not. Not able to be turned around
Good Rump
-Capable of being turned around. May be underperforming because of general sector problems. May be heavily influenced by whether the institutions are controlling shareholders or not.
classic buy-out candidate
in a mature sector with stable cash flow and modest investment requirements
What life-cycle theories suggest are the most important company-related characteristics which are likely to influence the longevity of a given organization?
fast-growing company, concentrating markets where it is necessary to have sufficiently large critical mass to survive, and relatively high levels of merger activity
Is it important to give consideration to an eventual harvest?
Yes, because at some point the investors will want to pull their money out
What are the different harvest possibilities in adverse conditions?
secondary buyouts and buy-ins
buy-backs
partial sales
restructurings as an alternative to the more conventional trade sales and floats
