The Opportunity Cost of Capital of US Buyouts

Groh, Alexander Peter; Gottschalg, Oliver

doi:10.3386/w14148

Cited by 8 publications

(6 citation statements)

References 107 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…In recent years a considerable number of empirical studies dealing with value creation in PE were published (see, e.g., Achleitner, Braun, Engel, Figge, & Tappeiner, 2010; Acharya, Hahn, & Kehoe, 2010; Groh & Gottschalg, 2009; Guo, Hotchkiss, & Song, 2011; Nikoskelainen & Wright, 2007). However, there is still a lack of research looking into the mechanisms of increasing the value of buyout targets and thereby PE returns, even if there are some notable contributions (see, e.g., Acharya et al, 2010; Guo et al, 2011; Nikoskelainen & Wright, 2007).…”

Section: Introductionmentioning

confidence: 99%

“…Although the availability and reliability of data to analyze PE deals on the transaction level have improved somewhat, most PE value creation studies to date focus (i) on the mature Anglo‐Saxon markets (see, e.g., Groh & Gottschalg, 2009; Nikoskelainen & Wright, 2007), (ii) on relatively large transactions (see, e.g., Acharya et al, 2010) and/or (iii) on public‐to‐private transactions (see, e.g., Guo et al, 2011). To the best of our knowledge, this is the first comprehensive study analyzing deal‐level value creation drivers in small and large PE transactions including buyouts from Europe (Continental Europe and the UK) and North America, covering deals of all sizes and entry/exit types.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Value creation and pricing in buyouts: Empirical evidence from Europe and North America

2011

View full text Add to dashboard Cite

Using a unique proprietary data set of 1980 realized and unrealized buyouts completed between 1986 and 2010, we examine entry and exit pricing in buyouts and its influence on private equity (PE) sponsors' returns. We find that besides leverage and operational improvements, EBITDA multiple expansion (i.e. the difference between entry and exit pricing) is a fundamental factor in explaining equity returns and the result of skill rather than pure luck. We also provide evidence that more experienced PE sponsors use more debt to finance a PE transaction and debt is positively related to entry buyout pricing. However, for a transaction with a given leverage level, more experienced PE sponsors are able to negotiate lower prices. In addition, our results show that deals conducted by first time funds which are realized in a later stage of a fund's life cycle are associated with lower exit prices which can be explained by the increased exit pressure for the PE sponsor.

show abstract

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Value creation and pricing in buyouts: Empirical evidence from Europe and North America

2011

View full text Add to dashboard Cite

show abstract

“…Since the median asset beta of firms in our sample is 0.67, this would produce an overly conservative estimate of returns for our sample. See also Groh and Gottschalg (2009) for a discussion of risk‐adjusted discount rates for buyouts.…”

mentioning

confidence: 99%

Do Buyouts (Still) Create Value?

Guo¹,

Hotchkiss²,

Song³

2011

The Journal of Finance

356

View full text Add to dashboard Cite

We examine how leveraged buyouts from the most recent wave of public to private transactions created value. Buyouts completed between 1990 and 2006 are more conservatively priced and less levered than their predecessors from the 1980s. For deals with post-buyout data available, median market-and risk-adjusted returns to pre-(post-) buyout capital invested are 72.5% (40.9%). In contrast, gains in operating performance are either comparable to or slightly exceed those observed for benchmark firms. Increases in industry valuation multiples and realized tax benefits from increasing leverage, while private, are each economically as important as operating gains in explaining realized returns.

show abstract

“…Ugyancsak nehéz kezelni a modellekben a nagyarányú hitelek igénybevétele miatt felmerülő, ügyletenként eltérő kockázatokat. Groh-Gottschalg [2009] kivásárlási alapokra vonatkozó számításai rávilágítanak, hogy a hitelek magas aránya miatt különösen problematikus a hipotetikus nyilvános piaci indexek kialakí-tása és a tényleges kivásárlási hozamok ezzel való összehasonlítása.…”

Section: A Kilépések Hozamaunclassified

A kapitalizmus új királyai: kockázati tőke Magyarországon és a közép-kelet-európai régióban

Karsai¹

2012

View full text Add to dashboard Cite

The Opportunity Cost of Capital of US Buyouts

Cited by 8 publications

References 107 publications

Value creation and pricing in buyouts: Empirical evidence from Europe and North America

Value creation and pricing in buyouts: Empirical evidence from Europe and North America

Do Buyouts (Still) Create Value?

A kapitalizmus új királyai: kockázati tőke Magyarországon és a közép-kelet-európai régióban

Contact Info

Product

Resources

About