Value Creation in Private Equity-Sponsored Leveraged Buyouts: Estimating a Many-to-Many Matching Game

64 Pages Posted: 22 Jan 2014 Last revised: 20 Jan 2019

Date Written: January 17, 2019

Abstract

This paper estimates an empirical model of two-sided many-to-many matching game in which private equity investors acquire publicly traded companies in leveraged buyouts, and examines the value creation of these transactions. This method calculates match-specific values by exploiting the characteristics of both private equity investors and companies. It is therefore able to identify and quantitatively estimate the value created through investor influence and that created through debt. In public-go-private transactions completed between 1986 and 2007, the direct influence of private equity investors generates a significant value which is equal to 7.8 percent of the pre-buyout market capitalization of the going private companies. However, the value generated through debt is insignificant.

Keywords: Private equity, leveraged buyout, matching model, estimation

JEL Classification: G20, G23

Suggested Citation

Gao, Lei, Value Creation in Private Equity-Sponsored Leveraged Buyouts: Estimating a Many-to-Many Matching Game (January 17, 2019). Available at SSRN: https://ssrn.com/abstract=2383049 or http://dx.doi.org/10.2139/ssrn.2383049

Lei Gao (Contact Author)

Shandong University ( email )

27 Shanda Nanlu
South Rd.
Jinan, SD Shandong 250100
China

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