Download or read book Drivers of Value Creation in a Secondary Buyout written by Ann-Kristin Achleitner and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Purpose - While secondary buyouts have gained in importance in recent years, specific drivers of value creation of this type of private equity deal are not yet well understood. Through the in-depth analysis of the acquisition of Brenntag by BC Partners, we develop propositions on the value creation profile in secondary buyouts. Design/methodology/approach - We use a single case study design to explore the information-rich context of a secondary buyout. The Brenntag case epitomizes the development of a company from being part of a large conglomerate to being private equity owned after the primary and secondary buyout up to being publicly listed. Our analysis is based on nine semi-structured interviews with key protagonists and the analysis of primary company data as well as additional secondary data sources. Findings - We propose that even if the investment management and monitoring skills of the primary and secondary private equity group are similar there is still the potential to realize operational improvements in a secondary buyout due to either an early exit of the primary private equity group or measures that further enhance management incentivisation. Furthermore, the Brenntag case shows that low information asymmetries can lead to higher leverage and that opportunities for multiple expansion are limited in secondary buyouts.Originality/value - While a secondary buyout has been a common exit route in recent years, we are the first to undertake an in-depth case analysis of a secondary buyout. Our study helps researchers and practitioners to enhance their understanding of drivers behind the value creation profile of secondary buyouts.

Download or read book Value Creation in Leveraged Buyouts written by Nicolaus Loos and published by Springer Science & Business Media. This book was released on 2007-11-05 with total page 490 pages. Available in PDF, EPUB and Kindle. Book excerpt: Based on a dataset of over 3,000 leveraged buyout transactions, including performance data, Nicolaus Loos analyses how financial investors create economic value through their investments. He shows that various exogenous factors with respect to timing, industry, public market as well as deal specific factors can statistically be related to a buyout deal's performance. He also provides evidence of a "GP effect" in leveraged buyouts, i.e. that certain characteristics of a Private Equity firm and its investment professionals as well as a firm's buyout strategy approach and certain buyout target characteristics are important success factors.

Download or read book German Buyouts Adopting a Buy and Build Strategy written by Nils Hoffmann and published by Springer Science & Business Media. This book was released on 2008-02-29 with total page 267 pages. Available in PDF, EPUB and Kindle. Book excerpt: Within the frame of a case study and questionnaire-based research, Nils Hoffmann investigates the key characteristics of buy and build strategies affected by private equity investors in Germany between 1998 and 2003. The author analyzes which value drivers and management strategies financial sponsors use to generate the return targeted. Furthermore, the research presented provides evidence concerning key success factors of the most profitable buy and build strategies.

Download or read book Secondary Buy Outs written by Alexander Knauer and published by . This book was released on 2014 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the growth strategies, the operational performance and the deal performance of 357 world-wide, back-to-back buyout cycles, containing both, the Primary Buyout (PBO) and the consecutive Secondary Buyout (SBO) of the same portfolio firm between 1997 and 2012. I find that inorganic growth strategies are significantly more often conducted in SBOs. There is no evidence that the operational growth is different for PBOs and SBOs, when controlling for the financial crisis. However, SBOs show a significantly lower expansion of the operational margin. Lastly, I find that deal returns are comparable for both buyout cycles, and that buy-and-build strategies are an important return driver in SBOs. My results suggest, that the focus is especially on efficiency improvement during the PBO, while in SBOs the strategy is to further grow the business of an already efficiently managed portfolio firm.

Download or read book Reverse Leveraged Buyout written by Pierre-Alain Masson and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study offers an approach to the value creation problem in Reverse Leveraged Buyout (RLBO) transactions. It presents an overview of the actual state of the Private Equity industry and a description of RLBO stakeholders, rationale, processes and products. The different drivers of the value creation or destruction during the private period ownership are exposed and depicted with a sample case. The methodology for the analysis includes an asset pricing perspective (CAPM) and a financial statements analysis. The goal of the case is to examine what would've happen to the value of the firm if the firm were not gone private. The work should be read from the point of view of an investor considering to buy shares from a PE-backed IPO firm.

Download or read book Value Creation Drivers in Large Leveraged Buyouts written by Daniel Ilg and published by . This book was released on 2016 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This work employs the most complete data sample of large private equity backed transactions in Germany ranging from 1997 to 2008. This research casts light on the impact of the holding period, the effects of divesting activities and expectations about the future shape of the economy on the performance of deals. A longer holding period is associated with a lower internal rate of return, and, contrary to expectations, this study finds a return diminishing effect of selling subsidiaries of target companies. In addition, I apply a new measure of business expectation: ifo slope. Ifo slope incorporates the theory of the interest term structure as a business economic development indicator. Positive expectations at entry lead to higher returns in the future and periods of economic downturn are stretching the length of the investment dramatically. Finally, larger deals are financed more aggressively with debt and generate more value by multiple expansion than smaller deals.

Download or read book Performance Dependency of Secondary Buyouts on Primary Buyouts written by Tjark Eschenröder and published by . This book was released on 2019 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Secondary buyouts (SBOs) represent more than 50 percent of the total private equity (PE) buyout activities. However, in academia and practise, a potential underperformance of SBOs compared to primary buyouts (PBOs) is discussed. Therefore, it is all the more important to further understand how the value in SBOs is driven and what makes a potential SBO attractive to look at in a due diligence process. This paper describes the dependency of SBOs on the preceding PBOs based on a dataset of 295 PBOs with their consecutive SBOs. It analyses the impact of the performance of a portfolio company during a PBO on the performance of the following SBO and derives value drivers and their influence on the SBO. Based on the performance of the value drivers during the PBO five criteria are identified for a pre-selection of SBOs. There is not a single perfect strategy for all SBOs, but the value drivers during the SBO differ strongly depending on the identified selection criteria. Generally, general partners (GPs) do not only use complementary skillsets, i.e. they do something completely different across buyout rounds. Additionally, they work on similar value drivers but with a different focus than the previous investor, i.e. they work differently on similar areas of improvement.

Download or read book Value Creation of Buyout Funds written by Samuel Hiller and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This Bachelor thesis aims to contribute to the existing research on value creation in leveraged buy-outs by empirically analysing a current sample of portfolio companies in buyout funds. After a brief market review and an introduction to the workings of private equity as an asset class, a detailed overview of existing levers regarding value generation is provided, followed by the theoretical foundation and mathematical deduction of a buyout investment's core performance drivers. This framework provides the cornerstone of the subsequent empirical analysis which intends to answer four questions: (a) What drives the returns of leveraged buyouts? (b) How are these returns influenced by various factors, e.g. the transaction size? (c) How do buyout firms create value in their portfolio companies? and (d) do private equity backed companies perform better than comparable public industry peers? The key finding of this study confirms the assumed replacement of the leverage effect by a company's operating performance as the most important driver of buyout performance. In order to differentiate themselves from other buyout firms, LBO investors need to actively engage in portfolio company management to achieve significant improvements in operating performance and thus superior returns in a mature market. Furthermore, results highlight a positive influence of buyout investors on margin developments when compared to public industry peers. Private equity backed companies achieve substantially higher margin growth rates during the post-acquisition phase, despite their on average already superior performance prior to the buyout.

Download or read book Performance of Private Equity Funds written by Taro Niggemann and published by GRIN Verlag. This book was released on 2005-09-20 with total page 98 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2005 in the subject Business economics - Investment and Finance, grade: 1.0, Otto Beisheim School of Management Vallendar, course: Doppeldiplomprogramm WHU Koblenz / EM Lyon, language: English, abstract: Private equity is currently replacing hedge funds as the most observed asset class. And while mutual funds experience a decline of assets under management, buyout funds break all records as far as fund raising is concerned. The attractiveness of buyout funds among investors is often attributed to superior returns and to an allegedly lower correlation with other asset classes. However, buyout fund returns also show superior volatility. In addition to that risk factor, investors must face liquidity and transparency risk. It is common agreement that investors are compensated for the elevated risk through a return premium. This and the cited lower correlation prompt more and more investors to add private equity into their portfolios. The wide-spread opinion of superior private equity performance is backed by several studies. But the analysis of these studies reveal that a number of them employ methodologies which are disapproved of by experts on theoretical private equity performance measurement. Furthermore, some have a one-sided notion of financial performance. Benchmarking, risk and correlation data which are crucial for an overall performance assessment often lack. The analysis of a series of technically appropriate, objective studies shows that private equity has historically outperformed public equity with regard to returns, in Europe more than in the United States (US). What remains unsolved is to which extent this return premium rewards the inherent, additional risk of private equity investments. And what is more certain: the prevalent view on correlation seems to be wrong. Empirical evidence and qualitative analysis speak for high correlation between private equity and the major asset classes. The most important driver for individual fund performance appears to be the quality of fund management. Thereby, specialized teams outperform others. Moreover, specialized funds provide investors better opportunity to diversify their private equity portfolio. Fundraising and investment conditions for private equity funds in France and Germany are favorable, but the accomplishment of superior performance will become harder in the future. The rules of the private equity business are changing as operating leverage has replaced financial leverage as the essential value driver.

Download or read book Value Creation in Middle Market Buyouts written by John L. Chapman and published by . This book was released on 2009 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Is private equity an effective governance structure, or simply a means of transferring wealth from quot;Main Streetquot; to quot;Wall Streetquot;? How do buyouts affect target-company organization and strategy? How do deal characteristics such as size, industry, transaction complexity, buyer characteristics, holding period, and the like affect the performance of private-equity transactions? Are revenue improvements driven primarily by changes in employment and capital expenditures, or by changes in organization and strategy? Despite a healthy literature on buyouts, little is known about the details of private equity transactions, as most studies rely on publicly available data or confidential data from a single buyout firm. This paper uses a unique sample of 288 exited transactions over a 20-year period across 19 industries from 13 buyout firm firms, based on confidential data from detailed interviews with the general partners of several leading private-equity partnerships. While prior studies have focused on whole-company, going-private buyouts, our sample includes transactions with minority stakes, syndicate deals, and consolidating roll-up or add-on strategies, and we have detailed information on internal rates of return, leverage, equity stakes, and other deal characteristics. We find that the pursuit of ancillary consolidating acquisitions is the biggest driver of post-buyout revenue and profit growth, that solo deals and deals with controlling stakes outperform syndicated or quot;clubquot; deals, that rates of return have declined over time as buyout markets have become more competitive, that mitigation of agency costs is critical for deal success, and more generally, that private equity can improve the performance even of sound businesses by providing access to resources, industry-specific expertise, capital for recombining assets (most often, consolidation in a fragmented industry), or recapitalization and ownership transition. Finally, our findings suggest the potential for further research of private equity at the transaction level.

Download or read book Behind the Curve An Analysis of the Investment Behavior of Private Equity Funds written by Christian Deger and published by Diplomica Verlag. This book was released on 2013 with total page 81 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the domain of corporate acquisitions, leveraged buyouts (LBO) have gained tremendous importance since their first appearance in the late 1970?s. After having suffered from different economic downturns throughout the years, buyouts have become a major force in the worldwide economy, and reached a record accumulated transaction value of $878bn in 2007. LBOs are generally conducted by a private equity (PE) firm through a buyout fund. The fund manager raises a certain amount of equity from outside investors, and invests it into later-stage companies for an average holding period of around five years. An important characteristic of an LBO is that investments are not only financed by equity capital from the fund but, also with a significant amount of debt which is raised individually on a deal-by-deal basis. Moreover, the compensation of both fund managers, and equity investors is not based on the individual investment itself but, on the success of the whole fund. As a result, the particular conditions of buyout investments in a fund setting, as well as the distinct incentive structure of buyout funds, facilitate an increased sensitivity of fund managers with regard to the current state of their fund. This may also influence their leverage and pricing decisions on the transaction level. Corresponding research on buyout structuring is still in its infancy. While there is an increasing amount of empirical literature on the various determinants of leverage and pricing in buyout transactions, little is known about how the investment behavior of buyout funds drives these structuring decisions. A notable exception is the work by Axelson, et al. (2009), who developed a theoretical model that is based on a principal agent conflict between fund managers and outside investors. The model provides a number of predictions on how the investment behavior of fund managers impacts leverage, and decisions about prices at investment entry. The main goal of this study is to identify the forces behind these decisions, and to verify empirically the predictions of the Axelson, et al. (2009) model. Therefore, the work of Axelson, et al. (2009), supplemented with additional literature on LBO leverage and pricing, as well as the investment behavior of buyout funds, forms the theoretical part of the study. Based on the findings of this theoretical part, three hypotheses are formulated, and tested through the use of comprehensive investment pressure variables that were developed on the basis of a representative dataset of 1,190 buyout transactions which were completed between 1985 and 2009.

Download or read book Value Creation in Successful LBOs written by Daniel Pindur and published by Springer Science & Business Media. This book was released on 2009-05-21 with total page 339 pages. Available in PDF, EPUB and Kindle. Book excerpt: Daniel Pindur analyzes value creation in successful LBOs on investment level conceptually and empirically from an LBO equity investor perspective. Based on the LBO transaction model, the author decomposes total proceeds to LBO equity investors and derives a two-tier framework of an internal and an external perspective, thereby structuring the conceptual discussion of various determinants affecting these components.

Download or read book The Value add Potential of Secondary Buyouts written by Philip Gericke and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Secondary buyouts achieved considerable growth over the post-financial crisis period from 2009 to now. Based on 93 secondary buyouts and 177 trade sale companies, we analyze the relative post-operating performance of both exit strategies. Our results show that secondary buyouts can add value by achieving top-line sales growth. Furthermore, the efficiency gains are not significantly different from trade sale companies. Possible explanations are the increasing share in buy-and-build and internationalization strategies followed by PE companies, which can lead to top-line sales growth, economies of scale, and the realization of synergies. Contrary to primary buyouts, we find that the disciplining effect of leverage only leads to a marginal improvement in efficiency. Furthermore, our results show that a highly leveraged capital structure can hamper the sales growth of secondary buyout companies; possibly caused by the inability to raise further debt for growth investments. Nonetheless, our results indicate that secondary buyouts do have a justified existence in the private equity market and are not only used to buy time and reallocate capital.

Download or read book Value Creation in Private Equity written by Markus Biesinger and published by . This book was released on 2020 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt: We open up the black box of value creation in private equity with the help of confidential information on value creation plans and their execution. Plans are tailored to each portfolio company's needs and circumstances, have become more hands-on, and vary with deal type, ownership, growth strategy, and geographic focus. Successful execution is subject to resource constraints, economies of specialization, and diminishing returns, and varies systematically across funds. Successful execution is a key driver of investor returns, especially in growth, buyout, and secondary deals. Company operations and profitability improve in ways consistent with successful execution, even beyond PE funds' exit.

Download or read book Leveraged Buyouts written by Luc Renneboog and published by . This book was released on 2017-06-23 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt: Leveraged Buyouts: Motives and Sources of Value analyzes the motives for taking public firms private and provides a structured and critical review of the empirical research in this area. The authors examine which types of firms go private and the determinants of takeover premiums in LBO transactions; investigate whether the post-transaction value creation, as well as the duration of the private status, can be explained by the aforementioned potential value drivers; answer the questions whether or not Public-to-Private (PTP) transactions lead to superior organizational forms compared to public firms, and whether going private is a shock therapy to restructure firms generating both strong short- and long-term returns; and document the trends and drivers of global LBO activity in the 1980s, 1990s, and the subsequent decades. After a short introduction, Section 2 briefly discusses on the different types of leveraged buyouts and going-private transactions. Section 3 discusses the theoretical considerations underlying the sources of wealth gains from going private deals. Section 4 focuses on the four main strands of the literature - namely, on the Intent to do an LBO, on the Impact of the LBO measured by changes in the share price returns, on the LBO Process or on how the firm is restructured in the post-LBO stage, and on the Duration of being a private firm - and on the empirical evidence supporting the eight motives proposed by each strand of the literature. Section 5 explains the drivers behind the observed LBO waves that emerged over the past 35 years. Section 6 lines out a future research agenda.

Download or read book Private Equity Demystified written by John Gilligan and published by Oxford University Press, USA. This book was released on 2020-11-05 with total page 434 pages. Available in PDF, EPUB and Kindle. Book excerpt: Private equity has grown rapidly over the last three decades, yet largely remains poorly understood. Written in a highly accessible style, the book takes the reader through what private equity means, the different actors involved, and issues concerning sourcing, checking out, valuing, and structuring deals.

Download or read book Venture Capital and Private Equity written by Josh Lerner and published by . This book was released on 2000 with total page 568 pages. Available in PDF, EPUB and Kindle. Book excerpt: What Explains the Recent Tremendous Growth in Private Equity Funds? How Have These Funds Created so Much Value? Can We Expect This Kind of Growth in Other Countries and Other Types of Investments? The pool of U.S. private equity funds has grown from $5 billion in 1980 to over $175 billion in 1999. Private equity's recent growth has outstripped that of almost every class of financial product. Whether you are an entrepreneur seeking private equity finance, a private equity investor grappling with the industry's changes, or an investor interested in private equity as a potential investment, this book is required reading! It presents a collection of real world cases-supplemented by detailed industry notes-that explore the exciting and dynamic world of venture capital and buyout funds. The organization mirrors that of the venture capital/private equity process itself: * The first part explores the raising and structuring of private equity funds, as well as the perspective of investors. * The second part explores the selection,oversight, and adding value to firms-the 'heart' of the private equity cycle. * The third part describes how private equity groups reap attractive returns from successful investments. * The final section explores the emerging efforts to translate the private equity model into other settings, such as corporate venturing programs.