Family Ownership, Private Equity Funds and Financial Performance is There a Family Equity Premium in LBO Transactions?

43 Pages Posted: 5 Nov 2012

See all articles by Palard Jean-Etienne

Palard Jean-Etienne

affiliation not provided to SSRN

Céline Barredy

University of Bordeaux - Montesquieu University - Bordeaux IV

Nicolas Bedu

University of Bordeaux - Montesquieu University - Bordeaux IV

Date Written: June 6, 2012

Abstract

Family ownership, private equity funds and financial performance Is there a family equity premium in LBO transactions?" "Do family firms develop better performance after a LBO transaction than non-family firms or subsidiaries of public companies? This article explores the relationships between family equity ownership, the role of Private Equity fund and the valuation and financial performance of a target after the completion of a LBO. The study is based on 123 transactions completed on French targets between 2003 and 2007 with a majority stake above 50% and different measures of financial data one year ( 1Y) and three years ( 3Y) after the LBO. Similarly to the literature related to LBO’s, univariate analysis shows that the financial performance and the number of employees tend to increase after a LBO for both family and non-family firms. The results indicate also that the ROE is higher and the level of interest charges is lower for family firms. Moreover, the results from OLS regressions show that the relative value of a target is positively correlated with the family criteria and the presence of a PE (for respectively xEBIT and EV/Deal). Finally, the financial performance (ROE) is positively correlated with the family criteria whereas the gross economic performance (ROCE) is positively linked with the presence of a PE fund.

Suggested Citation

Jean-Etienne, Palard and Barredy, Céline and Bedu, Nicolas, Family Ownership, Private Equity Funds and Financial Performance is There a Family Equity Premium in LBO Transactions? (June 6, 2012). 29th International Conference of the French Finance Association (AFFI) 2012. Available at SSRN: https://ssrn.com/abstract=2084295 or http://dx.doi.org/10.2139/ssrn.2084295

Palard Jean-Etienne (Contact Author)

affiliation not provided to SSRN ( email )

Céline Barredy

University of Bordeaux - Montesquieu University - Bordeaux IV ( email )

33608 Pessac Cedex
France

Nicolas Bedu

University of Bordeaux - Montesquieu University - Bordeaux IV ( email )

33608 Pessac Cedex
France

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