Harvard Business Review

JUNE 29, 2015

If you ask someone who works in finance (as I had to) about PE and innovation, he or she will likely tell you that PE sponsors aren’t looking for the next big thing—they’re looking for companies that are dominant in a market, aren’t risky, and have a predictable and steady stream of cash to pay back debt.

LBO 8

LBO Innovation Sample Short-term 8

Harvard Business Review

SEPTEMBER 30, 2014

In 1976, the famous LBO firm KKR was formed and starting charging its clients 2% of assets under management and 20% of the upside they created for their clients, opening the door to massive wealth accumulation for high-flying fund management talent. In 1977, the movie Star Wars was released, with sequels following in 1980 and 1983.

LBO 9

LBO Arkes Open-book Incentives 9

Harvard Business Review

AUGUST 9, 2016

This phase was loosely called leverage buy out (LBO) from about 1979 to 1990 and included over 2,000 LBOs. These “buy, fix, manage, and then sell” PE firms were essentially umbrella holding companies while the acquired firms would become better managed before returning to the public market.

LBO 8

LBO Restructuring Real Estate Leveraged Buy-out 8