When Do Managers Seek Private Equity Backing in Public-to-Private Transactions?
Jana P. Fidrmuc
Warwick Business School - Finance Group
Warwick Business School
Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)
Dick J. C. Van Dijk
Erasmus University Rotterdam - Erasmus School of Economics - Econometric Institute; ERIM
July 1, 11
Review of Finance, Forthcoming
EFA 2008 Athens Meetings Paper
Managers have the choice to take thefirm private themselves in a management buy-out or to seek private equity backing. We argue that managers seek private equity backing in case they are more constrained to finance the deal themselves. We confirm the hypothesis using a sample of UK public-to-private transactions over the period 1997-2003. A post going private performance analysis reveals that both management buyouts and private equity backed deals outperform their industry peers. However, private equity backed deals outperform their peers already before the deal takes place whereas management buyouts improve performance afterwards. This suggests a passive role for private equity firms in going private transactions.
Number of Pages in PDF File: 49
Keywords: Public-to-Private Transactions, Private Equity, Corporate Governance
JEL Classification: G32, G34Accepted Paper Series
Date posted: March 17, 2008 ; Last revised: July 3, 2012
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