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This study of the required return by venture capitalists found that early-stage specialists seek a much higher return than other venture capitalists when investing in later-stage ventures. Acquisition-buyout specialists are looking for a much lower return when investing in expanding firms. Higher returns are found for venture capitalists that are more involved in the entity, have a shorter investment timeframe, or are located in the US or UK, vs the Netherlands, Belgium or France.

This article examines new developments in corporate refocusing policies with particular emphasis on the role of venture capitalists in the divestment process. Venture capitalists, through their involvement in management buy-outs and newer investor-led buy-outs, may increasingly have important roles to play in enhancing the options open to divestors. With new evidence from major corporate divestors and venture capitalists, the article provides insights for practitioners and researchers into the process of divestment, choices between modes of divestment, the importance of auctions and the role of incumbent management in divisions which are to be sold.

Privatization efforts in Central and Eastern Europe companies are encumbered by intents to speed up the sale due to their adverse effects on incumbent management. The inefficient privatization schemes practiced by such governments eventually reduce the effectivity of buy-outs and create future problems for the governments involved in the economic transition. Some schemes for improving privatization efforts are presented.

The merits and drawbacks of the management buyout (MBO) as a mechanism in the privatization of public organizations in the UK are examined. Recent trends in buyouts are summarized, and finance and control issues are reviewed. The rationale for MBOs, their financing and post-privatization regulation are explored. The general principles are illustrated through three case studies that involve RFS Industries, Unipart and British Coal.

The leveraged buy-out market in Europe has developed greatly though along different lines since the trend flourished in the US in the 1980s. The biggest economies do not necessarily have the most highly developed markets and those with the highest short-term potential. Most deals are small, financed largely with venture capital, particularly in France, the UK and the Netherlands. Trade sale has replaced stock market flotation as the preferred way to sustain buy-out firms. In the UK, managers with an entrepreneurial bent often lead the transactions to gain greater control of the business.

This paper seeks to extend the literature an examination of the relationships created when a large firm divests itself of activities previously carried out in-house and sells them to employees who have been managing them so creating an independent entity or management buy-out. The paper discusses the conceptual framework for the divestment to management to take place and presents new empirical evidence which throws light upon the possibilities available and the problems encountered. (Reprinted by permission of the publisher.)

The value of UK management buyouts and similar deals rose by 39% to 37.5 billion pounds sterling in 1996 according to the University of Nottingham, while deals were up by 7% to 619 transactions. Buy-ins are becoming more important and tend to involve higher values than buyouts. There are some parallels with 1989 when some deals went wrong. There are risks in assuming that share prices will continue to perform well, though the economic fundamentals do appear more favourable in 1997.

The total value of the 542 deals conducted in the UK buyout market in 1995 was just over five billion pounds sterling. While this total is some way off the record-breaking 7.5 billion pounds in buyout deals attained in 1989, it still holds the distinction of being the second-highest value ever attained. However, unlike 1989 when traditional management buyouts (MBOs) accounted for the bulk of deals, the buyout deals of 1995 were dominated by management buy-ins (MBIs) and investor buyouts (IBOs). Another difference between the two years is that in 1995, there were was little activity involving publicly listed companies going private. Instead, a good amount of the activity centered around buy-ins of strategic divestments and the sale of smaller private companies. Another source of activity was the participation of venture capitalists in deals involving companies with high-growth prospects.

Italy has seen a lower level of management buyouts and buy-ins for a variety of reasons, such as high interest rates, recession, devaluation of the lira, and instability in Italian politics. There were 13 buyouts in 1992 compared with 30 in 1991, and figures for 1993 are difficult to obtain due to confidentiality and overlapping with the category of acquisitions. Factors likely to benefit the market include privatisation, restructuring, low inflation and lower rates of interest, and the impact of recession and competition on divestment decisions.

The Italian management buyout market has been depressed for the last 18 months. The value of buyouts fell to 391 million pound sterling for 13 deals in 1992, compared to 632 million from 30 deals in 1991, according to CMBOR. The number of buyout investments including syndications totalled 35 in 1992, worth 122.1 million pound sterling, compared to 44 in 1991 worth 178.7 million pound sterling. Buyouts make up only 15.8% of the investment deals in the Italian venture capital industry.

The new states of Germany are the driving force in the management buyout markets of Germany and Austria. Former W German buyout activity was about the same in 1992 as in 1991, when about 26 deals took place. It is estimated that the market value fell to 179 million pound sterling from about 344 million pound sterling in 1991. About 2,364 buyouts or buy-ins were among the 12,581 privatisations made by the Treuhandanstalt in the new states by end-June 1993. The Austrian buyout market is non-existent.

Employee share ownership in developing and newly industrializing countries in Africa and Asia is examined. The key issues relating to the implementation of wider employee share ownership and the objectives for employee ownership are explored. Attempts to develop employee ownership appear to face similar, although more intense, problems as advanced industrialized nations.

The Dutch management buyout market is anticipated to have been very buoyant in 1998. Most management buyouts, in the Netherlands, are due to large enterprises selling companies not vital to their core business, as part of a restructuring exercise. These deals involve middle and small sized companies, such as the publishing company Wegener Arcade selling its Music Store retail outlets. One of the largest deals was the buyout of Kappa Packaging for 1.5 billion euros. The Belgian buyout market continues to increase, with $451 million worth of transactions carried out during 1997.

It is anticipated in some Scandinavian countries the buyout market may experience a slight slowdown but in others, such as Norway and Denmark the markets seem to be less stable. Private equity companies, based in Scandinavia, all increased their funds during 1998. It is predicted the value of transactions in Denmark, for 1998, are not likely to improve on figures of $408 million from 1997. Whereas deals in Sweden rose from a value of $852 million in 1996, to $1.5 billion in 1997. Deals in Finland also increased to $796 million in 1997, from $380 million in 1996.

In 1997, the value of the Dutch buyout market totalled 661 million pounds sterling, with a total of 61 deals. Venture capital investment in buyouts was up 32% to 665 million Dutch Florins (DFl). Deals completed during 1997 include the DFl3.4 billion buyout of the Kappa Packaging division from KNP BT of the Netherlands; and the buyout of Bols Royal Distilleries from Bols Wessanen.