Realisations of Venture Capital Investments: The Case of Management Buy-outs in the UK

One of the most rapidly developing sectors of the financial services industry in the UK has been venture capital, and with it the growth of management buy-outs. As these markets have matured, increasing attention is being paid to issues associated with the realisation of gains for both institutions and equity-holding management. This article seeks to contribute to this area by examining the issues involved in the realisation of investments in management buy-outs. Based on detailed interviews with 24 managers of buy-outs which have exited, and on information drawn from the Centre for Management Buy-out Research database, the article considers the relative merits of flotations, trade sales, capital restructurings, secondary buy-outs, share redemptions etc. The article also addresses the agency cost issues involved in controlling buy-outs to enable institutions to achieve realisation of their investments at a price and timing which enable their targets to be met.