Strategic redirection in large management buyouts: the evidence from post-buyout restructuring activity

Article Abstract:

The restructuring activities undertaken by afirm after having gone through a management buyout are examined. Management buyouts (MBOs) involve large debt issues for the purpose of converting a firm from public to private stock ownership which is concentrated in the hands of management and a few investors. Data from 32 US corporations that underwent buyouts within the 1983-1989 period are analyzed in order to document the post-transaction divestment and acquisition activites they undertook. The results and long-term viability of such MBOs are examined, given criticism of it as a market concentrating measure. The results indicate that restoration of strategic focus through minimization of shareholder-management conflict, and efficiency considerations in the disposition of assets are important reasons for undertaking MBOs. Debt service does not appear to be a major problem in thefirms that continue to operate some pre-buyout sections.

Planning, Management buyouts, Corporate reorganizations

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Strategy and the research process: a comment

Article Abstract:

The 1989 paper by Cynthia A. Montgomery, Birger Wernerfelt, and Srinivasan Balakrishnan (MWB) offered a framework for improving research in the area of strategy research which provided valuable attention on the formulation and testing of theories. More precise definitions of science and theory are provided and it is shown that, in strategy research, inductive and deductive methods are valid methods for generating theory. Falsification is not a proper framework for strategy research. Stakeholder groups, including researchers, managers, and public policy-makers, have key roles to play in the development of knowledge.

Analysis, Management, Management research, Military strategy, Montgomery, Cynthia A., Wernerfelt, Birger, Balakrishnan, Srinivasan

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