Corporate Governance Should Combine the Best of Private Equity and Family Firms

Harvard Business

We believe so — it is a form of governance that is much older than the public and private equity models, one developed in sophisticated Western capital markets. In addition to the hybrid alternative, Western governance models are being challenged by a mutation of the classic private equity–leveraged buy-out model. The public corporation is typically bedeviled by the gap between managers’ and shareholders’ interests.

Private Equity’s New Phase

Harvard Business

In phase one (buy and sell), PE investors looked for the equivalent of a “fixer-upper house” — a dilapidated company in a good industry that could be purchased at a discount and, after the business equivalent of some fresh paint and new appliances, resold for a profit. This phase was loosely called leverage buy out (LBO) from about 1979 to 1990 and included over 2,000 LBOs. a condo development, apartment building, or golf course).

LBO 44