When Do Managers Seek Private Equity Backing in Public-to-Private Transactions?

49 Pages Posted: 17 Mar 2008 Last revised: 23 Dec 2019

See all articles by Jana P. Fidrmuc

Jana P. Fidrmuc

Warwick Business School - Finance Group

Alessandro Palandri

DCU Business School

Peter Roosenboom

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

Multiple version iconThere are 3 versions of this paper

Date Written: July 1, 11

Abstract

Managers have the choice to take the firm 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.

Keywords: Public-to-Private Transactions, Private Equity, Corporate Governance

JEL Classification: G32, G34

Suggested Citation

Fidrmuc, Jana P. and Palandri, Alessandro and Roosenboom, Peter and van Dijk, Dick J.C., When Do Managers Seek Private Equity Backing in Public-to-Private Transactions? (July 1, 11). Review of Finance, Forthcoming, EFA 2008 Athens Meetings Paper, WBS Finance Group Research Paper No. 93, Available at SSRN: https://ssrn.com/abstract=1101756 or http://dx.doi.org/10.2139/ssrn.1101756

Jana P. Fidrmuc (Contact Author)

Warwick Business School - Finance Group ( email )

Warwick Business School
Coventry CV4 7AL
United Kingdom

Alessandro Palandri

DCU Business School ( email )

Dublin 9
Ireland

Peter Roosenboom

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T09-56
3000 DR Rotterdam
Netherlands
+31 10 40 82255 (Phone)

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Dick J.C. Van Dijk

Erasmus University Rotterdam - Erasmus School of Economics - Econometric Institute

P.O. Box 1738
3000 DR Rotterdam
Netherlands

ERIM ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1263 (Phone)
+31 10 4089162 (Fax)

HOME PAGE: http://people.few.eur.nl/djvandijk

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