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

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  • David B. Sinyard
  • Steven S. Dionne
  • Karen D. Loch

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.

Suggested Citation

  • David B. Sinyard & Steven S. Dionne & Karen D. Loch, 2020. "Fast thinking in private equity: The role of heuristics in screening buyout opportunities," Journal of Small Business Management, Taylor & Francis Journals, vol. 58(6), pages 1221-1255, November.
    • Handle: RePEc:taf:ujbmxx:v:58:y:2020:i:6:p:1221-1255
    DOI: 10.1111/jsbm.12451
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    Cited by:

    1. Indu Khurana & Daniel J. Lee, 2023. "Gender bias in high stakes pitching: an NLP approach," Small Business Economics, Springer, vol. 60(2), pages 485-502, February.
    2. Simone Guercini, 2022. "Scope of heuristics and digitalization: the case of marketing automation," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 21(2), pages 151-164, November.

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