Value Creation Drivers in Private Equity Buyouts: Empirical Evidence from Europe

The Journal of Private Equity, Spring 2010

Posted: 1 Nov 2009 Last revised: 2 Mar 2010

See all articles by Ann‐Kristin Achleitner

Ann‐Kristin Achleitner

Technische Universität München - Center for Entrepreneurial and Financial Studies

Reiner Braun

Technische Universität München (TUM) - TUM School of Management

Nico Engel

Technische Universität München - Center for Entrepreneurial and Financial Studies

Christian Figge

Technische Universität München - Center for Entrepreneurial and Financial Studies

Florian Tappeiner

Technische Universität München - Center for Entrepreneurial and Financial Studies

Date Written: January 12, 2010

Abstract

Most of the existing research on value creation drivers in private equity buyouts is restricted to the US and the UK, whereas continental European countries are not included. In addition, most of the generally applied methods for measuring the importance of different value creation drivers do not comprehensively account for all relevant aspects, such as a clear separation between operating and financial risk. This article tries to fill these research gaps and analyzes value creation drivers in European (Continental Europe and the UK) buyouts from the perspective of private equity sponsors using a unique dataset of 206 realized transactions. Our methodology allows us to separate the value contribution of leverage on private equity sponsors’ returns from operational improvements and market effects. The results of the empirical analysis show that one third of the private equity sponsors’ returns can be attributed to the use of leverage, whereas two thirds are due to operational and market effects. Moreover, value creation drivers are analyzed with respect to different time periods, transaction size and general market conditions. Our results provide important insights into the private equity business model in Europe.

Keywords: private equity, leveraged buyouts (LBOs), value creation

JEL Classification: G24, G34

Suggested Citation

Achleitner, Ann-Kristin and Braun, Reiner and Engel, Nico and Figge, Christian and Tappeiner, Florian, Value Creation Drivers in Private Equity Buyouts: Empirical Evidence from Europe (January 12, 2010). The Journal of Private Equity, Spring 2010, Available at SSRN: https://ssrn.com/abstract=1496239

Ann-Kristin Achleitner

Technische Universität München - Center for Entrepreneurial and Financial Studies ( email )

Arcisstr. 21
Munich, D-80290
Germany
+49 89 289 25181 (Phone)

Reiner Braun

Technische Universität München (TUM) - TUM School of Management ( email )

Arcisstr. 21
Munich, Deutschland 80333
Germany
+498928925181 (Phone)
+498928925188 (Fax)

HOME PAGE: http://www.ef.wi.tum.de/

Nico Engel (Contact Author)

Technische Universität München - Center for Entrepreneurial and Financial Studies ( email )

Arcisstrasse 21
Munich, DE 80333
Germany

Christian Figge

Technische Universität München - Center for Entrepreneurial and Financial Studies ( email )

Arcisstrasse 21
Munich, DE 80333
Germany
49-89-2892190 (Phone)

Florian Tappeiner

Technische Universität München - Center for Entrepreneurial and Financial Studies ( email )

Arcisstr. 21
Munich, 80333
Germany

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