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Understanding value generation in buyouts

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Author Info

  • Gottschalg, Oliver

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  • Berg, Achim

    ()

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    Abstract

    In this paper, the authors develop a three-dimensional conceptual framework for value generation in buyouts that categorizes and links the different levers of buyouts value generation. This framework provides the basis to take a look beyond individual value levers and shed light on the underlying strategic logic of buyouts.

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    File URL: http://www.hec.fr/var/fre/storage/original/application/ae3c3607f35270a6d8741d00e1741735.pdf
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    Bibliographic Info

    Paper provided by HEC Paris in its series Les Cahiers de Recherche with number 824.

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    Length: 49 pages
    Date of creation: 01 Jan 2005
    Date of revision:
    Handle: RePEc:ebg:heccah:0824

    Contact details of provider:
    Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France
    Web page: http://www.hec.fr/
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    Related research

    Keywords: private equity; buyout; value generation;

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    References

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    1. Chun I. Lee & Stuart Rosenstein & Nanda Rangan & Wallace N. Davidson III, 1992. "Board Composition and Shareholder Wealth: The Case of Management Buyouts," Financial Management, Financial Management Association, vol. 21(1), Spring.
    2. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
    3. Richard Harris & Donald S. Siegel & Mike Wright, 2005. "Assessing the Impact of Management Buyouts on Economic Efficiency: Plant-Level Evidence from the United Kingdom," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 148-153, February.
    4. Lichtenberg, Frank R. & Siegel, Donald, 1990. "The effects of leveraged buyouts on productivity and related aspects of firm behavior," Journal of Financial Economics, Elsevier, vol. 27(1), pages 165-194, September.
    5. Holthausen, Robert W. & Larcker, David F., 1996. "The financial performance of reverse leveraged buyouts," Journal of Financial Economics, Elsevier, vol. 42(3), pages 293-332, November.
    6. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    7. Baker, George P, 1992. " Beatrice: A Study in the Creation and Destruction of Value," Journal of Finance, American Finance Association, vol. 47(3), pages 1081-119, July.
    8. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
    9. Palepu, Krishna G., 1990. "Consequences of leveraged buyouts," Journal of Financial Economics, Elsevier, vol. 27(1), pages 247-262, September.
    10. Smith, Abbie J., 1990. "Corporate ownership structure and performance *1: The case of management buyouts," Journal of Financial Economics, Elsevier, vol. 27(1), pages 143-164, September.
    11. Stulz, ReneM., 1990. "Managerial discretion and optimal financing policies," Journal of Financial Economics, Elsevier, vol. 26(1), pages 3-27, July.
    12. Amess, Kevin, 2002. "Management Buyouts and Firm-Level Productivity: Evidence from a Panel of UK Manufacturing Firms," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(3), pages 304-17, August.
    13. Lee, D Scott, 1992. " Management Buyout Proposals and Inside Information," Journal of Finance, American Finance Association, vol. 47(3), pages 1061-79, July.
    14. Ofek, Eli, 1994. " Efficiency Gains in Unsuccessful Management Buyouts," Journal of Finance, American Finance Association, vol. 49(2), pages 637-54, June.
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    16. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
    17. Marais, Laurentius & Schipper, Katherine & Smith, Abbie, 1989. "Wealth effects of going private for senior securities," Journal of Financial Economics, Elsevier, vol. 23(1), pages 155-191, June.
    18. Thompson, Steve & Wright, Mike & Robbie, Ken, 1992. "Buy-Outs, Divestment, and Leverage: Restructuring Transactions and Corporate Governance," Oxford Review of Economic Policy, Oxford University Press, vol. 8(3), pages 58-69, Autumn.
    19. Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, vol. 63(2), pages 134-39, May.
    20. Demsetz, Harold, 1983. "The Structure of Ownership and the Theory of the Firm," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 375-90, June.
    21. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    22. Bruining, J. & Wright, D.M., 2002. "Entrepreneurial Orientation In Management Buy-Outs And The Contribution Of Venture Capital," Research Paper ERS-2002-67-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    23. Lehn, Kenneth & Poulsen, Annette, 1989. " Free Cash Flow and Stockholder Gains in Going Private Transactions," Journal of Finance, American Finance Association, vol. 44(3), pages 771-87, July.
    24. Cotter, James F. & Peck, Sarah W., 2001. "The structure of debt and active equity investors: The case of the buyout specialist," Journal of Financial Economics, Elsevier, vol. 59(1), pages 101-147, January.
    25. Hayne E. Leland., 1989. "LBOs and Taxes: No One to Blame But Ourselves?," Research Program in Finance Working Papers RPF-185, University of California at Berkeley.
    26. Ippolito, Richard A & James, William H, 1992. " LBOs, Reversions and Implicit Contracts," Journal of Finance, American Finance Association, vol. 47(1), pages 139-67, March.
    27. Smart, Scott B & Waldfogel, Joel, 1994. "Measuring the Effect of Restructuring on Corporate Performance: The Case of Management Buyouts," The Review of Economics and Statistics, MIT Press, vol. 76(3), pages 503-11, August.
    28. Muscarella, Chris J & Vetsuypens, Michael R, 1990. " Efficiency and Organizational Structure: A Study of Reverse LBOs," Journal of Finance, American Finance Association, vol. 45(5), pages 1389-1413, December.
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    Citations

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    Cited by:
    1. Olivier, Gottschalg & Meier, Degenhard, 2006. "What does it take to be good parent ? Opening the black-box of value creation in the unrealated multibusiness firm," Les Cahiers de Recherche 822, HEC Paris.
    2. Gottschalg, Oliver & Meier, Degenhard, 2005. "Interest alignment and firm performance," Les Cahiers de Recherche 825, HEC Paris.

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