Contact: Eric Whittington, 336-758-5030, [email protected]
Tip sheet
Babcock Graduate School of Management
Wake Forest University
Fall 1999
1. Change-of-control incentives drive majority of management buyouts
There is little debate that when management buys the public interest in a company's stock and takes that company private, the company's financial performance usually improves, but why? Sherry Jarrell, assistant professor of finance and economics, has examined the two prevailing theories - change of control and insider information - regarding management buyouts. The change of control theory argues that the concentrated ownership, increased monitoring activity, and corporate officers' increased personal equity in the company create incentives to improve the company's performance. According to the insider information theory, such buyouts are driven by managers who have unique insight into or knowledge about the company's operations or industry. The research, based on 74 withdrawn management buyouts, indicates that positive returns are generated by a mixture of both theories, but the vast majority - 75 percent - of management buyouts appear to be primarily motivated by change-of-control i
Other topics Dr. Jarrell can address: Mergers and acquisitions; corporate "poison-pill" protection in hostile-takeover bids; integration of microeconomics, law and corporate finance
2. Research reveals key factors for fast product development
Developing products quickly in a competitive environment is critical to a company's bottom line. A carmaker can lose an estimated $2 million for each day it delays in introducing a new model that sells for $20,000. Barbara B. Flynn, professor of operations management, and E. James Flynn, associate professor of management, participated in research that examined factors that are important in developing products quickly. The study focused on eight product-development teams in the electronics industry. The products in development included electronic sensors, defense avionics and mainframe computers. Among the most surprising findings was that the teams that worked fastest tended to have the most members. The critical factors identified for fast product development were:
-- Resource allocation that prevents a project from having to compete with others for funding.
-- A flexible control system that allows the team to adapt rigid step-by-step processes to suit its needs and goals.
-- Close relationships with customers and suppliers that help identify important information early in the process.
-- An atmosphere that allows for a project "champion" to lead the team and a culture that encourages extraordinary efforts from team members to meet objectives.
The research was funded by a grant from the National Science Foundation's Transformations to Quality Organizations program.
Other topics Dr. Barb Flynn can address: Quality management and strategy; product innovation; just-in-time manufacturing practices
Other topics Dr. Jim Flynn can address: Strategic management (how firms build and sustain multiple competitive advantages); managing knowledge workers to gain competitive advantage
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For more information or to arrange interviews, contact Eric Whittington or Patricia Divine by phone at (336) 758-5030 or (800) 722-1622 or via email at [email protected] or [email protected]. Information about the Babcock School is available on the World Wide Web at www.mba.wfu.edu. Refer to our online media resource guide for a list of faculty who can provide expert comments on various business issues.
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