Cross-border Buyout Performance

Abstract

Using a novel dataset of 2,639 cross-border buyout investments during 1998-2007 in 38 countries, we find that the institutional quality of the portfolio company country, as measured by the ranking in the composite index of political, economic and financial risk, is an important determinant of cross-border buyout performance in terms of exit success. The higher the institutional quality of the portfolio company country, the higher the probability of a successful exit via IPO or M&A. PE firms’ international experience, industrial experience, and reputation based on deal experience help to improve buyout exit success and their industrial experience could mitigate the adverse influence of institutional distance between the portfolio company and the PE firm countries.

Keywords: LBOs, private equity, cross-border, law and finance

JEL Classification: G34