The phrase 'risk capital' may be out of favour in the private equity industry. But recent research on distressed deals highlights that buy-outs are not a one-way bet.

A survey by the Centre for Management Buy-Out Research of over 2,200 investments made between 1992 and 1995 found that by the middle of last year more than 200 businesses had failed. The typical investment holding period in the private equity sector is between three and five years. CMBOR reports that receivership accounted for about 30% of all buy-outs exited by the investors, the remainder being successful sales, secondary buy-outs or stock market listings.