Andrew Burrows

Family firm succession : the management buy-out and buy-in routes.

Purpose – This exploratory study aims to provide fresh insights into the ownership transfer of private family firms through internal management buy‐out (MBO) and external management buy‐in (MBI) succession routes. The paper aims to explore if flows of information impact the succession planning process and if the nature of succession planning impacts the business sale negotiation process relating to family firms that select MBO/MBI succession routes.Design/methodology/approach – Guided by insights from agency theory and theories relating to information asymmetries and negotiation behaviour six hypotheses were derived. Private family firms that had received venture capital and the MBO/I deals had been completed between 1994 and 2003 were identified. A structured survey was administered to 117 senior members of acquiring MBO/I management teams after the deal had been completed in several European countries. Non‐parametric chi‐square tests and Mann‐Whitney “U” tests were used to test the presented hypotheses....

MANAGEMENT BUYOUTS: FROM EUROPE TO JAPAN

A management buyout market is now developing in Japan as corporations face unavoidable pressures to restructure. In this article we compare the development of the Japanese management buyout market with the earlier development of the UK and German markets. Based on our three annual surveys of the market we first present trends in market value and volume and vendor and sectoral source of deals. We discuss the factors facilitating the development of buyouts, which are categorized into those leading to the supply of deal opportunities; the demand for private equity; the infrastructure to complete deals; and the nature of mechanisms to realize investments. The final section considers the implications of our findings for the future development of the market as well as for foreign entrants.

Private Equity in EU Accession Countries of Central and Eastern Europe

In 2004, a number of former communist countries will accede to the European Union. These countries have made considerable progress over the past decade in their transition to a market economy. Using interviews and archival data, we examine the prospects for development of private equity in CEE in terms of: Supply of Deal Opportunities; Demand for Private Equity; Infrastructure to Complete Deals; and Opportunities to Realize Gains. We find that, combined with existing professional services support and the blossoming of western-style capitalism, including additional deal sources and improved management practices, CEE private equity investors should find an enhanced environment for investment.

When do Venture Capitalists Make a Difference? The Export Intensity of Venture Capital Backed Companies

There has been considerable debate concerning the contribution of venture capitalists (VCs) to their investee companies (Sapienza, Manigart, & Vermeir, 1996). This research has shown that VCs can add value and impact the strategic direction of their investee firms through their skills and knowledge. These skills lie in two distinct areas: financial (monitoring) and non-financial (strategic and operational involvement) skills (Pruthi, Wright, & Lockett, 2003). The monitoring and involvement of VC firms in their investees have been shown to vary according to their needs (Lerner, 1995). On balance, the evidence suggests greater involvement during the more uncertain earlier stages than during the later stages when the firm is more established (Sapienza, Amason, & Manigart, 1994; Elango, Fried, Hisrich, & Polonchek, 1995). This suggests that the VCs ability to bring about change will be mediated by the impact of the history of the firm via path dependency (Teece, Pisano, & Shuen, 1997).

No Damages for a Third Party's Loss

In Alfred McAlpine Construction Ltd v Panatown Ltd,1 Panatown entered into a construction contract with McAlpine for McAlpine to design and construct an office building on land owned by Unex Investment Properties Ltd (UIPL). The building was defective and delayed and Panatown sought damages for the cost of repair, loss of use and delay. These losses were actually suffered by UIPL not by Panatown so that, at least on the face of it, the claim was by a promisee to recover damages suffered by a third party. It should be noted that Panatown was in the same group of companies—the Unex Group—as UIPL; and the reason the contract was made with Panatown rather than UIPL was as a means of avoiding value added tax. Judge Thornton QC, as official referee, had held that Panatown could recover only nominal and not substantial damages. The Court of Appeal had overturned that and, by extending the so-called Albazero exception to the normal rule that a promisee can recover only its own loss,2 had held that Panatown was entitled to substantial damages for UIPL’s loss. By a 3–2 majority, the House of Lords restored Thornton J’s decision. Panatown was not here entitled to substantial damages. One reason why this may be regarded as a difficult case is that there were five full speeches running to 70 pages. Moreover, one cannot say that of the majority (Lords Clyde, Jauncey and Browne-Wilkinson) there was one leading speech; and, in one crucial respect, Lord Browne-Wilkinson of the majority was prepared to assume that the minority’s reasoning was correct. In addition, both the dissenting speeches of Lords Goff and Millett were very full. My own view, with great respect, is that the reasoning of all five of their Lordships was, to some extent, flawed, and that the majority’s decision was incorrect. Taking the majority’s reasoning first, there were three central steps. First, the majority accepted that the general rule of damages is that a promisee can recover only its own loss and not a third party’s loss. That this is the general rule has inherent support from the classic authority on contractual damages of Robinson v Harman,3 which focuses on putting the claimant into as good a position as if the contract had been performed. It is also directly supported by the reasoning of the   Oxford University Commonwealth Law Journal 107