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Private Equity Firm Experience and Buy-out Vendor Source: What is their Impact on Efficiency?

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  • Y. ALPEROVYCH
  • K. AMESS
  • M. WRIGHT

Abstract

Using a dataset comprising 102 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 three years 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 buyouts are about as efficient as the average. Divisional buyouts show highest efficiency levels overall. 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 two years after the transaction.

Suggested Citation

  • Y. Alperovych & K. Amess & M. Wright, 2012. "Private Equity Firm Experience and Buy-out Vendor Source: What is their Impact on Efficiency?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/800, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:12/800
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    Cited by:

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    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. Aurélie Sannajust & Alexander Groh, 2023. "Pioneering management buy-out and entrepreneurial finance research: Mike Wright’s research legacy," Small Business Economics, Springer, vol. 60(1), pages 1-35, January.
    6. 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.
    7. 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.
    8. 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.
    9. Amess, Kevin & Stiebale, Joel & Wright, Mike, 2015. "The impact of private equity on firms' innovation activity," DICE Discussion Papers 184, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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    private equity; management buyouts; efficiency; dynamic data envelopment analysis;
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