What Determines the Exit Decision for Leveraged Buyouts?

35 Pages Posted: 21 Sep 2009 Last revised: 13 Jun 2015

See all articles by Tim Jenkinson

Tim Jenkinson

University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Miguel Sousa

School of Economics and Management, University of Porto

Date Written: May 29, 2015

Abstract

How and when to exit portfolio company investments are critical choices facing private equity funds. In this paper we analyze 1,022 European private equity exits, using information on fund and portfolio company characteristics, and on conditions in capital markets. For over 43% of the exits, private equity funds sold to each other and we analyze why such secondary buyouts have gained in popularity relative to IPOs and sales to corporate acquirers. We find that the exit route depends on various portfolio company characteristics, and that conditions in the debt and equity markets have a strong influence on exit choice. The existing literature has tended to portray the IPO is the “preferred” exit route. However, our analysis suggests this is mistaken: private equity funds take advantage of ‘windows of opportunity’, and the exit route that maximizes value varies with market conditions.

Keywords: secondary buy-out, exits, private equity

JEL Classification: G11, G14, G24

Suggested Citation

Jenkinson, Tim and Sousa, Miguel, What Determines the Exit Decision for Leveraged Buyouts? (May 29, 2015). Available at SSRN: https://ssrn.com/abstract=1475912 or http://dx.doi.org/10.2139/ssrn.1475912

Tim Jenkinson

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
United Kingdom
+44 1865 288916 (Phone)
+44 1865 288831 (Fax)

HOME PAGE: http://www.sbs.oxford.edu/timjenkinson

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Miguel Sousa (Contact Author)

School of Economics and Management, University of Porto ( email )

Rua Roberto Frias
s/n
Porto, 4200-464
Portugal

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