Premium
Private Equity Lemons?Evidence on Value Creation in Secondary Buyouts
Author(s) -
Achleitner AnnKristin,
Figge Christian
Publication year - 2014
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/j.1468-036x.2012.00644.x
Subject(s) - leveraged buyout , private equity , private equity firm , business , leverage (statistics) , debt , equity (law) , club deal , monetary economics , finance , economics , political science , law , machine learning , computer science
Abstract This paper analyses whether secondary buyouts have a value creation profile and offer equity returns different from those of primary buyouts. Using a sample of 2,456 buyout transactions (including 448 secondary buyouts), we find no evidence that secondary buyouts generate lower equity returns or offer fundamentally lower operational value creation potential. However, we can show that secondary buyouts obtain 28–30% more leverage than primary buyouts, even after controlling for debt market conditions. Furthermore, we find evidence that secondary buyouts are 6–9% more expensive than other buyouts.