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.
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