Fast thinking in private equity: The role of heuristics in screening buyout opportunities

David B. Sinyard, Steven S. Dionne and Karen D. Loch

Journal of Small Business Management, 2020, vol. 58, issue 6, 1221-1255

Abstract: This study utilizes a multiple-case analysis to examine the decision-making processes surrounding buyout decisions of small-to-medium businesses. Qualitative data were generated from semistructured interviews at 20 private equity groups. Rather than relying on a retrospective review of prior decisions, we present decision-makers with teasers, a summary of an investment opportunity. Our results indicate that heuristics are utilized to guide selection and execution of buyout investments. We also uncover the role of affect: strong positive or negative responses to specific stimuli in the teasers. Furthermore, the use of heuristics has important implications in the sourcing of private equity for business owners.

Date: 2020
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DOI: 10.1111/jsbm.12451

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