Value Creation in Private Equity

83 Pages Posted: 8 May 2020

See all articles by Markus Biesinger

Markus Biesinger

Darmstadt University of Technology; European Bank for Reconstruction and Development (EBRD)

Cagatay Bircan

European Bank for Reconstruction and Development (EBRD)

Alexander Ljungqvist

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Research Institute of Industrial Economics (IFN)

Multiple version iconThere are 3 versions of this paper

Date Written: April 2020

Abstract

We open up the black box of value creation in private equity with the help of confidential information on value creation plans and their execution. Plans are tailored to each portfolio company's needs and circumstances, have become more hands-on, and vary with deal type, ownership, growth strategy, and geographic focus. Successful execution is subject to resource constraints, economies of specialization, and diminishing returns, and varies systematically across funds. Successful execution is a key driver of investor returns, especially in growth, buyout, and secondary deals. Company operations and profitability improve in ways consistent with successful execution, even beyond PE funds' exit.

Keywords: financial returns, Growth investing, Machine Learning, private equity, secondaries, value creation, venture capital

JEL Classification: G11, G24, G30, G32, L26

Suggested Citation

Biesinger, Markus and Bircan, Cagatay and Ljungqvist, Alexander, Value Creation in Private Equity (April 2020). CEPR Discussion Paper No. DP14676, Available at SSRN: https://ssrn.com/abstract=3594309

Markus Biesinger (Contact Author)

Darmstadt University of Technology ( email )

Universitaets- und Landesbibliothek Darmstadt
Magdalenenstrasse 8
Darmstadt, Hesse D-64289
Germany

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2EH
United Kingdom

Cagatay Bircan

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2JN
United Kingdom
+442073388508 (Phone)
+442073386111 (Fax)

HOME PAGE: http://cagataybircan.com

Alexander Ljungqvist

Stockholm School of Economics ( email )

111 60 Stockholm
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

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