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Private equity firm experience and buyout vendor source: What is their impact on efficiency?

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  • Alperovych, Yan
  • Amess, Kevin
  • Wright, Mike

Abstract

Using a dataset comprising 88 Private Equity (PE) backed Leveraged Buyouts (LBOs) completed and exited during the period 1999–2008, this study sheds new light on the impact of buyout vendor source and PE investor experience on post-buyout efficiency during the first 3years after the transaction. There are three main findings. First, we observe increases in post-buyout efficiency over time, although LBOs from different vendor source differ in terms of post-transaction efficiency levels and improvement trajectories. Private and divisional buyouts are more efficient than the average. Divisional buyouts show higher efficiency improvements than private and secondary buyouts. Secondary buyouts remain below the average. Second, multivariate analyses suggest a positive and significant effect of PE firm experience on post-buyout efficiency. Finally, the observed efficiency patterns seem to be convex, suggesting the major improvements happen in the first 2years after the transaction.

Suggested Citation

  • Alperovych, Yan & Amess, Kevin & Wright, Mike, 2013. "Private equity firm experience and buyout vendor source: What is their impact on efficiency?," European Journal of Operational Research, Elsevier, vol. 228(3), pages 601-611.
  • Handle: RePEc:eee:ejores:v:228:y:2013:i:3:p:601-611
    DOI: 10.1016/j.ejor.2013.01.019
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    1. Alperovych, Yan & Hübner, Georges & Lobet, Fabrice, 2015. "How does governmental versus private venture capital backing affect a firm's efficiency? Evidence from Belgium," Journal of Business Venturing, Elsevier, vol. 30(4), pages 508-525.
    2. Cumming, Douglas & Deloof, Marc & Manigart, Sophie & Wright, Mike, 2019. "New directions in entrepreneurial finance," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 252-260.
    3. Kao, Chiang, 2014. "Network data envelopment analysis: A review," European Journal of Operational Research, Elsevier, vol. 239(1), pages 1-16.
    4. Benjamin Hammer & Heiko Hinrichs & Bernhard Schwetzler, 2018. "Does culture affect the performance of private equity buyouts?," Journal of Business Economics, Springer, vol. 88(3), pages 393-469, May.
    5. Hammer, Benjamin & Knauer, Alexander & Pflücke, Magnus & Schwetzler, Bernhard, 2017. "Inorganic growth strategies and the evolution of the private equity business model," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 31-63.
    6. Robert Loos & Bernhard Schwetzler, 2017. "Fueling the buyout machine: fundraising in private equity," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 31(4), pages 397-443, November.
    7. Amess, Kevin & Stiebale, Joel & Wright, Mike, 2016. "The impact of private equity on firms׳ patenting activity," European Economic Review, Elsevier, vol. 86(C), pages 147-160.
    8. Amess, Kevin & Stiebale, Joel & Wright, Mike, 2015. "The impact of private equity on firms' innovation activity," DICE Discussion Papers 184, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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