A Theory of Private Equity Turnarounds

35 Pages Posted: 16 Jan 2006

See all articles by Charles J. Cuny

Charles J. Cuny

Washington University in St. Louis - John M. Olin Business School

Eli Talmor

London Business School

Date Written: January 2006

Abstract

This paper explores the advantage of private equity in turnaround situations. Since the analysis and recovery plan of floundering businesses is typically carried out by an external turnaround specialist, it is not clear what causes a breakdown in the ownership-management separation. The paper explores scenarios under which the transfer of ownership to private equity prior to implementing an operational turnaround can emerge as an optimal solution. Also considered is the possibility of investment syndication by which it the potential buyer can share the transaction with other private equity firms. Various alternatives are considered to approach the turnaround process, in particular, ones that allow for management replacement and others that do not.

Keywords: Private Equity, Turnaround

JEL Classification: G32, G34

Suggested Citation

Cuny, Charles J. and Talmor, Eli, A Theory of Private Equity Turnarounds (January 2006). Available at SSRN: https://ssrn.com/abstract=875823 or http://dx.doi.org/10.2139/ssrn.875823

Charles J. Cuny

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
(314) 935 4527 (Phone)

Eli Talmor (Contact Author)

London Business School ( email )

Regent's Park
London, NW1 4SA
United Kingdom
+44 20 7000 7000 (Phone)

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