In this paper, we show that secondary buyouts (SBOs) do not generate a signifi?cant improvement in the operating performance of target companies. We collect deal-level infor mation on 2,911 buyouts between 1998 and 2008 and gather detailed fi?rm-level ?financial and accounting information on 163 companies targeted by two consecutive leveraged acquisitions in the period 1998-2008. We show that ?first-round buyers generate a large and signi?cant ab normal improvement in operating performance and efficiency. In contrast, SBO investors do not show statistically signi?cant evidence of incremental contribution to the performance oftarget companies whereas they increasing leverage and squeeze-out. Returns to PE investors are signifi?cantly lower in secondary transactions and are mostly determined by large dividend payments. Market-wide SBO activity is signifi?cantly determined by favorable debt market conditions and PE reputation. Additionally, large and high-value deals are more likely to be exited through an SBO. We test a possible collusive motive for this class of deals, fo?nding some support for this conjecture.
|Date of creation:||2012|
|Contact details of provider:|| Postal: via Rontgen, 1 - 20136 Milano (Italy)|
Web page: http://www.igier.unibocconi.it/
|Order Information:|| Web: http://www.igier.unibocconi.it/en/papers/index.htm Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael C. Jensen, 2010.
"The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems,"
Journal of Applied Corporate Finance,
Morgan Stanley, vol. 22(1), pages 43-58.
- Jensen, Michael C, 1993. " The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems," Journal of Finance, American Finance Association, vol. 48(3), pages 831-880, July.
- Michael C. Jensen, 1994. "The Modern Industrial Revolution, Exit, And The Failure Of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 6(4), pages 4-23.
- 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.
- Richard Harris & Donald S. Siegel & Mike Wright, 2003. "Assessing the Impact of Management Buyouts on Economic Efficiency: Plant-Level Evidence from the United Kingdom," Rensselaer Working Papers in Economics 0304, Rensselaer Polytechnic Institute, Department of Economics.
- Palepu, Krishna G., 1990. "Consequences of leveraged buyouts," Journal of Financial Economics, Elsevier, vol. 27(1), pages 247-262, September.
- Demiroglu, Cem & James, Christopher M., 2010. "The role of private equity group reputation in LBO financing," Journal of Financial Economics, Elsevier, vol. 96(2), pages 306-330, May.
- Phillippe Desbrières & Alain Schatt, 2002. "The Impacts of LBOs on the Performance of Acquired Firms: The French Case," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(5&6), pages 695-729.
- Philippe Desbrières & Alain Schatt, 2002. "The Impacts of LBOs on the Performance of Acquired Firms:the French Case," Working Papers CREGO 1020702, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
- Cumming, Douglas & Siegel, Donald S. & Wright, Mike, 2007. "Private equity, leveraged buyouts and governance," Journal of Corporate Finance, Elsevier, vol. 13(4), pages 439-460, September.
- Nikoskelainen, Erkki & Wright, Mike, 2007. "The impact of corporate governance mechanisms on value increase in leveraged buyouts," Journal of Corporate Finance, Elsevier, vol. 13(4), pages 511-537, September.
- 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. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:igi:igierp:441. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.