The Management Miss-Out

Van der Vliet, Anita, Management Today

In the '80s, managers who bought out their own businesses could land huge windfalls. In a more sober 1996, however, MBOs aren't such easy earners.

Once upon a time there was a divisional manager, an average type of bloke who put in just enough effort to keep out of trouble, and whose division performed accordingly not disastrously, but not too brilliantly either. This division was a bit of a backwater anyway, not strictly related to the corporation's mainstream business, which is why one day top management decided to dispose of it. Rumours of this impending change gradually seeped into the consciousness of our manager, who felt somewhat unnerved by the thought of new and presumably more demanding bosses. Musing gloomily with his colleagues on this unpleasant prospect, he had a sudden brainwave. 'Why don't we buy out the business ourselves?' he cried, signalling to the barman for another round of drinks. 'We'd get top managers off our backs, and in a few years' time, when we floated, we'd make a fortune.'

Seized with unwonted energy, he and his colleagues swooped into action, convincing top management, appointing advisers, securing finance, mortgaging houses, and then working like billyo in their new company for two years so as to improve performance and thus ratchet up their share of the equity still further. Some of the executives left behind in the original corporation remarked scathingly on the sudden progress of the former division, but our manager was undeterred, pointing (quite accurately) to the sting of envy in their comments. Came the flotation, and the company was valued at twice the buy-out price. Our manager and his team, who owned substantial equity stakes, were multi-millionaires. 'We're rich! We're rich!' he crowed. Then he woke up.

And yes, it …

Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: The Management Miss-Out. Contributors: Van der Vliet, Anita - Author. Magazine title: Management Today. Publication date: November 1996. Page number: 62+. © 2003 Haymarket Business Publications Ltd. COPYRIGHT 1996 Gale Group.

This material is protected by copyright and, with the exception of fair use, may not be further copied, distributed or transmitted in any form or by any means.