Insight Private Equity

SAFE Working Paper No. 23

37 Pages Posted: 20 Jun 2013

See all articles by Andrej Gill

Andrej Gill

Goethe University Frankfurt - Faculty of Economics and Business Administration

Nikolai Visnjic

Goethe University Frankfurt

Multiple version iconThere are 2 versions of this paper

Date Written: June 18, 2013

Abstract

We are able to shed light on the black box of restructuring tools private equity investors use to improve the operational performance of their portfolio companies. By building on previous work considering performance evaluation of PE backed companies, we analyze whether private equity improves operating efficiency and which of the typical restructuring tools are the main performance drivers. Using a set of over 300 international leveraged buyout transactions of the last thirty years, we find that while there is vast improvement in operational efficiency, these gains vary considerably. Our top performing transactions are subject to strong equity incentives, frequent asset restructuring and tight control by the investor. Furthermore, investors’ experience has a positive influence while financial leverage has no influence on operational performance.

Keywords: private equity, leveraged buyouts, active shareholders, corporate restructuring, operational performance

JEL Classification: G23, G24, G32, G34

Suggested Citation

Gill, Andrej and Visnjic, Nikolai, Insight Private Equity (June 18, 2013). SAFE Working Paper No. 23, Available at SSRN: https://ssrn.com/abstract=2281229 or http://dx.doi.org/10.2139/ssrn.2281229

Andrej Gill (Contact Author)

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Grüneburgplatz 1
Frankfurt am Main, D-60323
Germany

Nikolai Visnjic

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

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