Incidence and Structure of European Buyout Syndicates: Empirical Results from an Integrated Study

45 Pages Posted: 15 Mar 2012 Last revised: 15 Dec 2012

See all articles by Randy Priem

Randy Priem

Katholieke Universiteit Leuven

Nancy Huyghebaert

KU Leuven - Department of Accountancy, Finance and Insurance

Linda M. Van De Gucht

KU Leuven - Department of Applied Economics

Date Written: March 14, 2012

Abstract

We empirically examine under what conditions lead financiers decide to finance a buyout through a syndicate of multiple investors and how these syndicates are structured, using a unique dataset of 865 European buyouts during 1999-2009. We rely on a theoretical framework that integrates the benefits of syndication, based on risk-diversification, resource-based, and deal-flow motives, and the costs of syndication, such as potential information and incentive problems within the syndicate. We find evidence that lead financiers syndicate to diversify target default and legal risk, and to learn about the institutions of the target country. Lead financiers subsequently decide on the fraction of the deal to retain and on the number of syndicate participants so as to minimize syndication costs while further maximizing syndication benefits. Interestingly, and after accounting for the endogeneity of syndication decisions, we find that the post-buyout profitability and growth of target firms are superior when buyouts are syndicated and when these syndicates are structured to maximize investor involvement while limiting conflicts of interest.

Keywords: Buyout, Syndication, Agency Problems, Legal Institutions, Target-Company Performance

JEL Classification: D74, D82, G24, G32, K42

Suggested Citation

Priem, Randy and Huyghebaert, Nancy and Van De Gucht, Linda M., Incidence and Structure of European Buyout Syndicates: Empirical Results from an Integrated Study (March 14, 2012). Available at SSRN: https://ssrn.com/abstract=2021728 or http://dx.doi.org/10.2139/ssrn.2021728

Randy Priem (Contact Author)

Katholieke Universiteit Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3010
Belgium

Nancy Huyghebaert

KU Leuven - Department of Accountancy, Finance and Insurance ( email )

Naamsestraat 69
B-3000 Leuven, 3000
Belgium
00 32 16326737 (Phone)
00 32 16326683 (Fax)

HOME PAGE: http://www.econ.kuleuven.be/eng/fetew/medewerker/Userpage.aspx?PID=524

Linda M. Van De Gucht

KU Leuven - Department of Applied Economics ( email )

Naamsestraat 69
B-3000 Leuven
BELGIUM

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