According to Frank Fischer, Apex Equity Partners Managing Director, management buyouts (MBOs) can be very beneficial to the job market by preserving and creating jobs, as well as boosting the economy. By coming under new ownership and operating privately, companies are able to focus on their employees and innovation, two of the most important aspects in creating and maintaining a successful business.
A management buyout takes place when a company’s management purchases the assets and operations of whatever the business is they manage. Investopedia explains that this type of buyout is popular when large corporations have interests elsewhere, and it provides many benefits to both the employees and the management team.
While MBOs have received negative criticism in the past, Frank Fischer states, the potential benefits are vast and important, as they not only affect the management taking ownership, but also the employees of the company.
According to Fischer, it is not uncommon for jobs to be saved through buyouts. This is especially important in today’s global economic climate.
A fast food chain in the United Kingdom called West Cornwall Pasty Company was recently bought out by investors, causing over two hundred jobs to be saved. Chris Cormack, a board member for the company, told Express & Star, “West Cornwall Pasty Company is a market-leading brand, loved by millions of customers, and we are delighted this transaction takes the brand and business forward whilst preserving more than 200 jobs.”
Additionally, throughout a long buyout process for the Irish sports store chain Elvery’s, the management team has promised to preserve all 654 employees throughout the company’s 56 stores.
In the United States, similar things are happening, as the focus of more buyouts is to save the jobs that currently exist. According to The Wall Street Journal, even during Motorola’s effort to restructure and reduce its overhead costs, spokesman Nicholas Sweers stated that the company would “continue to hire in many areas both in the United States and globally.”
Now that Lenovo has acquired Motorola, the acquisition will give Lenovo the opportunity to become an innovative global competitor, reports The Verge. The company’s focus is now on developing the Motorola brand to make it a strong competitor in the United States and other major markets.
Not only can buyouts help preserve the jobs people have depended on, they can also create more jobs. This is especially important in the United States; as the Bureau of Labor Statistics reports, there were approximately 10.5 million unemployed people in March of this year.
Recently, the Virginia-based company Venn-Corp underwent a buyout. According to the investors, Farragut Capital Partners, they are able to not only improve the services offered to clients, they have also been able to create about two dozen new jobs in Virginia and California.
For many companies, management buyouts also provide a fresh start, creating better sales and spurring economic growth, states Frank Fischer, Apex Equity Partners Managing Director. No matter what kind of business a company is in, innovation is what keeps it alive and successful. According to Mike Wright, Robert E. Hoskisson, Lowell W. Busenitz, and Jay Dial, authors of Entrepreneurial Growth through Privatization: The Upside of Management Buyouts, management buyouts give companies the structure and incentive to innovate.
Additionally, an article featured in Review of Economics and Statistics reports that companies generally see a substantial increase in productivity after a buyout, suggesting that the new ownership changes shift resources to more efficient uses and better managers.
For Twinlab, a dietary supplement company that struggled shortly after launching, a buyout was the answer. George Schneider, President of Capstone Financial Corp and advisor for the buyout, said that the turnaround accomplished by management was “nothing short of astounding. They have reduced debt, they have rebranded, they have launched new products.”
Now that Lenovo has recently acquired Motorola, the acquisition will give Lenovo the opportunity to become an innovative global competitor, reports The Verge. The company’s focus is now on developing the Motorola brand by offering a wide variety of quality products to make it a strong competitor in the United States and other major markets, which will help stimulate the economy.
Additionally, as employee buyouts have become very common in today’s economy, these offers often give employees who are tired and dislike their jobs a new chance to fulfill their lifelong dreams, or simply relax for a while. This is often a route that management offers their employees who may not be happy with the buyout, providing them with a severance package or maintaining their current position.
Donna Crivello told American Journalism Review that when she took a buyout offer at her old job, she knew it was an opportunity, not a dead end. She said, “I was unhappy going to work in the morning, daily there were more problems, there were more things that were happening that were disillusioning.” She realized that it was more important to be happy than to continue being miserable at a job she hated. Crivello is now living her dream of owning a restaurant, and told American Journalism Review that “you can do whatever you want to do.”
With his many years of experience, Frank Fischer, Apex Equity Partners Managing Director, explains that management buyouts are often more beneficial than they are harmful. He says, “Management buyouts, or MBOs, have at times unfairly and unjustly received unfavorable press. In fact, properly structured MBOs that avoid the pitfalls of excessive leverage can contribute to economic growth by creating jobs and preserving existing jobs.”
Ryann Carlson contributed to this article.