Exit Strategies of Buyout Investments - An Empirical Analysis

54 Pages Posted: 3 Mar 2008 Last revised: 2 Jun 2009

See all articles by Sascha Steffen

Sascha Steffen

Frankfurt School of Finance & Management

Daniel Schmidt

University of Frankfurt, CEPRES Center of Private Equity Research

Franziska Szabó

affiliation not provided to SSRN

Date Written: June 1, 2009

Abstract

We analyze the three main exit routes for exiting buyout investments, initial public offerings (IPO), sales and write-offs on, using a unique data set for US and European buyout transactions for the 1990 to 2005 period. We examine the determinants influencing the choice of an exit channel employing a multinomial logit model. The results strongly support the view that private equity investors write-off investments that turn out to be non-performing early, showing their ability to filter out good from bad investments. We further find evidence that exits of buyout investments tend to be driven by market sentiment. We further analyze as to how the internal rate of return (IRR) influences which exit route is chosen. We find supporting results that only the most profitable ventures are taken public. Our results have implications for exiting buyout investments during the current financial crisis.

Keywords: Leveraged Buyouts, Private Equity, Exits, Business cycle

JEL Classification: G15, G23, G32

Suggested Citation

Steffen, Sascha and Schmidt, Daniel and Heymann, Franziska, Exit Strategies of Buyout Investments - An Empirical Analysis (June 1, 2009). EFA 2008 Athens Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1101025 or http://dx.doi.org/10.2139/ssrn.1101025

Sascha Steffen (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee
32-34
Frankfurt, 60322
Germany
16097326929 (Phone)

HOME PAGE: http://www.sascha-steffen.de

Daniel Schmidt

University of Frankfurt, CEPRES Center of Private Equity Research ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Franziska Heymann

affiliation not provided to SSRN

Register to save articles to
your library

Register

Paper statistics

Downloads
1,188
rank
16,019
Abstract Views
3,838
PlumX Metrics