Private Equity Firm Experience and Buyout Vendor Source: What is Their Impact on Efficiency?
European Journal of Operational Research, Vol. 228, 2013
Posted: 28 Mar 2015 Last revised: 5 Jun 2017
Date Written: January 24, 2013
Using a dataset comprising 88 Private Equity (PE) backed Leveraged Buyouts (LBOs) completed and exited during the period 1999-2008, this study sheds new light on the impact of buyout vendor source and PE investor experience on post-buyout efficiency during the first 3 years after the transaction. There are three main findings. First, we observe increases in post-buyout efficiency over time, although LBOs from different vendor source differ in terms of post-transaction efficiency levels and improvement trajectories. Private and divisional buyouts are more efficient than the average. Divisional buyouts show higher efficiency improvements than private and secondary buyouts. Secondary buyouts remain below the average. Second, multivariate analyses suggest a positive and significant effect of PE firm experience on post-buy-out efficiency. Finally, the observed efficiency patterns seem to be convex, suggesting the major improvements happen in the first 2 years after the transaction.
Keywords: Dynamic data envelopment analysis, Private equity, Management buyouts, Divisional private and secondary buyouts, Efficiency
JEL Classification: G24, G34
Suggested Citation: Suggested Citation