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Rewriting the Rules for Buyouts

The article “Rewriting the Rules for Buyouts” by Andrew Sorkin provides new and original information about current business issues. Actually the article is devoted to buyout benefits for management and investment opportunities. It is necessary to outline that findings presented in the article significantly contribute the evidence that business nowadays is provided with more opportunities. Therefore the article leads through abundant data presented to persuade investors to trust management.

The author is rather persuasive, because he uses logical arguments, conclusions, facts and viewpoints of different critics to defend his position.  The author states that management-led buyouts are likely to benefit management and thus private bankers have to pay more attention to this issue. However, it is apparent that public investors have been often cheated, because “some stock that has been battered is being picked off by its own management and private equity firms at a paltry premium”.

Sorkin assumes that shareholders’ interests have to be represented in the company and thus they will be liable for taking the risks. The article strongly defends the point that shareholders’ interest mustn’t be left out, even the interests of minority shareholders. Moreover, the author recommends using only truly independent advisors, because investment bankers “have a

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huge hand in shaping outcome”.

The author also admits that shareholders are too suspicious nowadays, because private equity firms make a multiple of their original investment. Therefore, the solution is to offer shareholder about 8-10% stake in deal. Consequently, shareholders willing to obtain illiquid shares will be attracted by the offered solution.

The author believes that “it should be available only to shareholders who held the company before it announced its sale” meaning that shareholders don’t need any arbitrageurs. Finally, the author suggests that shareholders have to see business plan to understand better company’s objectives and directions. It means that company has to give away all secrets to attract investors and to calm shareholders.

References

Sorkin, Andrew. (2006, November 19). Rewriting the Rules for Buyouts. Retrieved November 19, 2006, from http://www.nytimes.com/2006/11/19/business/yourmoney/19deal.html?_r=2&ref=business&oref=slogin&oref=slogin

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