This is very different from what I’ve heard and read. From what I’ve read (economist and other sources), management in LBO’s is compensated quite handsomely. This is happening to the degree that some public companies with more shareholder scrutiny are having trouble retaining talent because they are having to compete with LBO shops that don’t have the same restrictions.
Also remember that LBO’s only make you rich if you can service the debt and have some left over. You want the incentives of the management team to be aligned with those of the investor. Equity stakes with attractive payoffs insure that.
I wonder if some of the angst you are hearing is from management teams of poorly performing LBO targets. It’s a bit like a lottery-payoff of average performance isn’t goign to knock your socks off, but the upside is tremendous.
