A lively roundtable on private equity published in the summer issue of the Journal of Applied Corporate Finance offers an insightful look at this misunderstood organisation form. The discussion by leading practitioners and academics lifts the veil on the leveraged buy-out process and highlights the link between governance and value creation.
Generating enormous returns, attracting hundreds of billions of dollars from institutional investors, targeting bigger and bigger companies such as Equity Office Properties ($36B) and HCA ($33B), and drawing away more and more top public company executive talent, the LBO business is booming.
Success and greater media attention are generating a rising tide of criticism, skepticism, and plain old sour grapes. These include both overpaying (and underpaying) in taking companies private, over-leveraging target companies, pulling out capital from investments too early, and doing nothing more than what can be replicated by public company managers.
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