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Secondary Buyouts: Operating Performance and Investment Determinants
Author(s) -
Bonini Stefano
Publication year - 2015
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12086
Subject(s) - leveraged buyout , private equity , reputation , business , investment (military) , equity (law) , initial public offering , monetary economics , private equity firm , finance , economics , politics , political science , law , social science , sociology
Secondary buyouts (SBOs) now represent over 60% of the overall buyout activity. In this paper, I investigate the possible determinants of such spectacular growth. I find that first round buyers generate a large and significant abnormal improvement in operating performance. In contrast, SBO operating growth is not different from that of its peer group. Returns to secondary private equity (PE) investors are positive, but significantly lower than those of first round buyers. I examine several alternative drivers of SBOs and find that favorable credit market conditions and PE reputation drive secondary investment volume.