ABSTRACT
This chapter identifies the reasons for the emergence of a financing gap for growing businesses that was eventually filled by the Management Buyouts (MBO)/private equity wave post 1980s. In contrast to the forms of entrepreneurial finance, the new waves of MBOs were a significant financial innovation in their own right. Certainly, the buyout waves of the 1980s and 1990s offered some interruption of the otherwise persistent problem of the equity gap, particularly for smaller, potentially innovative firms, which has now re-emerged in most sectors and regions following the global financial crisis. The chapter considers trends in business finance before and after the global financial crisis of 2007 in the context of longer-run patterns in financing. The validity of this conclusion can be supported by a comparison with the experience of the United States, which developed buyouts in parallel with the United Kingdom, but with some strikingly different features.
