Private Equity Buyouts and Portfolio Company Performance Post-exit
65 Pages Posted: 11 Dec 2022 Last revised: 12 Jul 2023
Date Written: December 6, 2022
Existing evidence on the impact of PE ownership on portfolio company growth and performance focuses predominantly on the post buyout PE holding period. Using a sample of over 1,200 realized UK PE buyouts, we track the performance of target firms after the PE exit. We study average portfolio company growth rates in the post exit period relative to the PE holding period. Within a difference-in-differences setting, we find that the positive impact of PE ownership on firm sales, earnings, employment, market share, and productivity persists after PE exit relative to control firms. Our results suggest that this performance differential is limited to the smaller and younger portfolio companies. Gains to productivity and investment levels are found to be stronger in the long run than in the PE holding period. However, PE portfolio company operating performance is not found to be stronger in the post exit period relative to the holding period and compared to matched controls. We track incidence of financial distress via formal insolvency notices and find that PE-backed companies are more likely to enter into insolvency proceedings in the post exit period relative to the holding period and to control firms. Post exit insolvency risk is concentrated in larger and older firms.
Keywords: Private equity buyouts, firm performance, long-run growth, insolvency
JEL Classification: G32, G34
Suggested Citation: Suggested Citation