This paper explores the nature of the co-called ‘private equity business model’ (PEBM) and assesses its shortcomings, using the illustrative example of the role of private equity in structuring the finance and subsequent collapse of MG Rover, as the automotive industry has been a significant destination for private equity financing. The paper outlines the nature of the PEBM. It then details how the PEBM extracts value, before stressing how this can affect workers in a portfolio business. We argue that the emergence of the PEBM changesthe basis of competitive rules in organizations and the running of erstwhile going concerns, necessitating a need for further regulation—particularly, how to secure wider stakeholder oversight without reducing the efficiency of PEBM concerns.
Bibliographical noteThis is a pre-copyedited, author-produced PDF of an article accepted for publication in Cambridge journal of regions, economy and society following peer review. The definitive publisher-authenticated version Bailey, D., Clark, I., & de Ruyter, A. (2010). Private equity and the flight of the phoenix four - the collapse of MG Rover in the UK. Cambridge journal of regions, economy and society, 3(3), 367-382 is available online at: http://cjres.oxfordjournals.org/content/3/3/367.abstract
- private equity business model
- automotive sector
- corporate governance
- economic restructuring