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Buyouts: A Primer

Author

Listed:
  • Jenkinson, Tim

    (University of Oxford - Said Business School; European Corporate Governance Institute (ECGI))

  • Kim, Hyeik

    (Ohio State University)

  • Weisbach, Michael S.

    (Ohio State University, NBER and ECGI)

Abstract

This paper provides an introduction to buyouts and the academic literature about them. Buyouts are initiated by “buyout funds†, which are limited partnerships raised from mostly institutional investors. The funds earn returns for their investors by improving the operations of the firms they acquire and exiting them for a profit. Buyout funds have grown substantially and currently raise more than $400 billion annually in capital commitments. We first discuss the institutional environment that developed to foster such buyouts and to provide incentives for general partners and firm managers to earn returns for the fund’s investors. We then describe various strategies that funds use to increase the values of their portfolio companies. The paper provides up to date statistics on all aspects of the buyout industry. Finally, we present a summary of the academic literature on buyouts. This literature has paid particular attention to the extent to which buyouts earn risk-adjusted abnormal returns for their investors, as well as the sources of those returns.

Suggested Citation

  • Jenkinson, Tim & Kim, Hyeik & Weisbach, Michael S., 2021. "Buyouts: A Primer," Working Paper Series 2021-18, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2021-18
    DOI: 10.2139/ssrn.3964770
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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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