What determines the exit decision for leveraged buyouts?

Jenkinson, Tim; Sousa, Miguel

doi:10.1016/j.jbankfin.2015.06.007

Cited by 49 publications

(53 citation statements)

References 37 publications

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“…Those results are in accordance with the market timing hypothesis and the evidences in Giot and Schwienbacher (2007) and Jenkinson and Sousa (2015). PE funds take advantage of favorable market windows to sell their investments.…”

Section: Resultssupporting

confidence: 88%

Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy

Minardi

Bortoluzzo

Rosatelli

et al. 2019

BAR, Braz. Adm. Rev.

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Private Equity (PE) funds are active investors. Besides providing capital, they improve the governance, operational performance and innovation of the investee companies. However, potential misalignment between the fund manager and the company owner regarding exit timing is a limitation of the model. PE funds have a finite-life, and thus they have to liquidate investments after holding them for a certain period. They tend to time the market to exploit favorable market conditions and obtain higher selling prices, and consequently, PE funds may divest before accomplishing the value creation plan. In this article, we use the hazard model to investigate the magnitude of the impact of market conditions on the exit rate of PE deals in Brazil, a volatile emerging economy, and if it increases the chances of exiting investments with holding periods shorter than two years. We analyze a sample of 470 PE deals invested between 1994 and 2014, and we investigate four variables related to market conditions: the stock market priceearnings ratio, the number of IPOs, the Brazilian real (the Brazilian currency) appreciation against the US dollar and the Brazilian interest rate. Our results show that favorable market conditions more than double the exit rate and increase the probability of quick flips.

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Section: Resultssupporting

confidence: 88%

Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy

Minardi

Bortoluzzo

Rosatelli

et al. 2019

BAR, Braz. Adm. Rev.

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show abstract

“…Acharya et al (2013) use interview data related only to the leading PE executives in a sample of large and mid-cap deals, backed by large PE houses. The popularity of SMBOs during the sample period, with a sharp drop in the number of entries in 2008, is consistent with other worldwide (Jenkinson and Sousa, 2015) and UK studies (Zhou, Jelic and Wright, 2014). On average, we track 1.3 strictly PE-related individuals per deal, which compares favourably with Acharya et al (2013).…”

Section: Data and Sample Descriptionsupporting

confidence: 86%

“…Figure 1 presents the yearly distributions of sample SMBOs by entry and exit. The popularity of SMBOs during the sample period, with a sharp drop in the number of entries in 2008, is consistent with other worldwide (Jenkinson and Sousa, 2015) and UK studies (Zhou, Jelic and Wright, 2014).…”

Section: Data and Sample Descriptionsupporting

confidence: 86%

Sustaining the Buyout Governance Model: Inside Secondary Management Buyout Boards

Jelic

Dan

Wright

2019

British J of Management

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This paper examines the impact of private equity (PE) directors and their human capital on operating performance in a unique hand-collected sample of 200 secondary management buyouts (SMBOs) during 2000-2015. It shows that PE directors' human capital tends to play a statistically and economically important role in performance. Financial (rather than operational) experience of PE directors in acquiring PE firms tends to have a substantial impact on post-SMBO profitability, while high-level business education is especially important in post-SMBO growth performance enhancement. Complementary expertise, provided by directors in buying and selling PE firms, plays an important role only in post-SMBO growth improvements.Overall, the paper's results provide evidence that governance benefits of the buyout model tend not to be exhausted in the primary buyout stage, but the effects in the secondary buyout phase depend on the nature of PE directors' human capital resource, notably in respect of the balance between board monitoring and advisory roles. This study therefore adds to growing evidence on how the ownership and life-cycle nature of firms affect sustainability of boards fulfilling their roles. The results are robust to sample selection bias, different types of PE firms and different measures of human capital.

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“…This equates to 44% of the deals initially identified in Capital IQ with a defined private equity investor. Using similar data sources, Jenkinson and Sousa (2015) report a 40% match from an initial sample of 2,567 exited deals involving European targets. 7…”

Section: Sample Characterizationmentioning

confidence: 99%

Private equity buyouts, credit constraints, and firm exports

et al. 2021

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We analyse the impact of private equity buyouts on firm exports, on a panel of UK non-financial firms over 2004-2017. Using difference-in-differences estimations, we show that private equity ownership increases the probability of exporting, the value of exports, and the export to sales ratio. We further show that the positive impact of private equity ownership on exports holds only after private-to-private buyouts, or acquisitions of small or young target firms. Our findings suggest that private equity investors mitigate the credit constraints faced by their portfolio companies, hence boosting their exports.

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What determines the exit decision for leveraged buyouts?

Cited by 49 publications

References 37 publications

Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy

Market Conditions and the Exit Rate of Private Equity Investments in an Emerging Economy

Sustaining the Buyout Governance Model: Inside Secondary Management Buyout Boards

Private equity buyouts, credit constraints, and firm exports

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