According to research published today by the European Private Equity and Venture Capital Association (EVCA), venture-backed management buy-outs and buy-ins lead to better than average performance, competitiveness, increased employment and remuneration, greater employee involvement and significant overall added value.
The survey, conducted by the Centre for Management Buy-out Research (CMBOR) at Nottingham University and sponsored by PricewaterhouseCoopers, polled 300 European companies that undertook buy-outs between 1992 and 1997. The companies responded to detailed questions about the reasons for their buy-outs, changes adopted in running their businesses, performance post-MBO and the role of the venture capitalists financing the transactions.
The findings suggest that the contribution of the venture capitalist is crucial to the success of a buy-out, both in terms of making it happen and in terms of the contribution made in the post-buyout period. 84 per cent of respondent companies said that they would no longer exist or would have developed more slowly without the venture-backed buy-out.
“This survey confirms what we have believed all along”, says Jonathan Russell, chairman of EVCA’s Buy-out Committee, “that the venture capitalist provides a value added investment by contributing more than simply finance. The venture capitalist also provides strategic advice and acts as a sounding board for management ideas.”
Some of the survey's key findings are:
Since 1990, the acquisition of companies by teams of managers has become a significant feature of the European private equity market. Investment in buy-outs grew by over 150 per cent between 1992-1997. By 1999, buy-outs represented 53per cent of the year’s total European private equity investment of E25.1bn.