Keep Taking the Private Equity Medicine? How Operating Performance Differs between Secondary Deals and Companies that Go to Public Markets

43 Pages Posted: 12 Mar 2012 Last revised: 22 Jul 2013

See all articles by Miguel Sousa

Miguel Sousa

School of Economics and Management, University of Porto

Tim Jenkinson

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

Date Written: July 22, 2013

Abstract

Although the number of secondary buy-out deals has increased noticeable in the last few years, firms exited through a secondary buy-out (secondary firms) clearly underperform firms turned public (IPO firms) in the first three full years after the exit. Evidence suggests that this underperformance can be partially explained by a longer holding period in the previous deal and by the lack of experience of the purchasing private equity investor but also shows that secondary firms invest much less than IPO firms after the exit. Given the overall results of this paper it seems premature to conclude that the increase in secondary buy-out deals and so the increase in the ultimate holding periods of firms undergoing private equity medicine is a sign that Private Equity is a superior long-term organizational form.

Keywords: Secondary buy-out, IPO, private equity, operational performance

JEL Classification: G11, G24, G34

Suggested Citation

Sousa, Miguel and Jenkinson, Tim, Keep Taking the Private Equity Medicine? How Operating Performance Differs between Secondary Deals and Companies that Go to Public Markets (July 22, 2013). Available at SSRN: https://ssrn.com/abstract=2019595 or http://dx.doi.org/10.2139/ssrn.2019595

Miguel Sousa (Contact Author)

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

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

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

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