Chapter 1

The Big Picture

The Big Picture

Covered in this Module

The Essence of a Buyout

Growth and Evolution of  the Buyout Market

Creating Value in Buyouts

The Management Challenge

Private Equity and Public Perception


This first Module looks at Buyouts in the broadest sense. First we identify the essence of a Buyout – and have listed five principles on which successful Buyouts are built – before briefly reviewing the growth and evolution of the Buyout market. The third section introduces the three key measures of value creation.

We then open a discussion (which is developed later to become a central theme in the book) about the role of the management team whose company is the subject of a sale process. When a Buyout represents only one of the possible outcomes of a sale process – as it almost invariably does – the Chief Executive and his senior colleagues face a complex mix of obligations, priorities and conflicts. The way in which they approach these issues, manage relationships with the company’s owner and make decisions about their own future will have a critical bearing on whether or not a Buyout can be achieved.

Many managers contemplating a Buyout understandably find their views and thoughts coloured by the extensive and growing public debate about the private equity industry. Unfortunately a large proportion of the contributions to this debate are only partially informed, and we seek to balance this with a section on the public perception of private equity.

Finally, we introduce the first of a series of case studies which illuminate the principles discussed and demonstrate their application in practice.