Private Equity, Corporate Governance, and the Reinvention of the Market for Corporate Control

In the early 1980s, during the first U.S. wave of debt-financed hostile takeovers and leveraged buyouts, finance professors Michael Jensen and Richard Ruback introduced the concept of the "market for corporate control" and defined it as "the market in which alternative management teams compete for the right to manage corporate resources." Since then, the dramatic expansion of the private equity market, and the resulting competition between corporate (or "strategic") and "financial" buyers for deals, have both reinforced and revealed the limitations of this old definition. Copyright (c) 2008 Morgan Stanley.