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Determinants of buyouts in private equity firms

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  • Louise Nordström

Abstract

Private equity companies have become a major force in the economic landscape. Financial- and operational-engineering are innovative characteristics of this emerging method of finance. The existing empirical data provide strong evidence that private equity activity contribute positively to the rapid growth of companies. In this paper probability of private equity funded buyouts in the Nordic market is investigated. Operationally this is done by applying a logit model on a number of firm specific accounting measures. The main finding is that it is the dynamics of these variables in the target firms that are important for potential buyouts. That is, the growth measured as change in employees, change in the debt equity level, and the change in EBITDA margin, all have a significant effect on the probability of being bought by a private equity firm. Keywords Private equity, buyouts, performance, logit model JEL codes G34 G32

Suggested Citation

  • Louise Nordström, 2011. "Determinants of buyouts in private equity firms," ERSA conference papers ersa10p1450, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa10p1450
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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