Private Equity Buyouts and Portfolio Company Performance Post-exit

65 Pages Posted: 11 Dec 2022 Last revised: 12 Jul 2023

See all articles by Paul Lavery

Paul Lavery

Adam Smith Business School, University of Glasgow

Nick Wilson

University of Leeds - Credit Management Research Centre; University of Leeds - Division of Accounting and Finance; University of Leeds - Faculty of Business

Date Written: December 6, 2022

Abstract

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

Lavery, Paul and Wilson, Nicholas, Private Equity Buyouts and Portfolio Company Performance Post-exit (December 6, 2022). Leeds University Business School Working Paper No. 23-02, Available at SSRN: https://ssrn.com/abstract=4295276 or http://dx.doi.org/10.2139/ssrn.4295276

Paul Lavery

Adam Smith Business School, University of Glasgow ( email )

University Avenue
Glasgow, Scotland G12 8QQ
United Kingdom
07979140811 (Phone)

Nicholas Wilson (Contact Author)

University of Leeds - Credit Management Research Centre ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

University of Leeds - Division of Accounting and Finance ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

University of Leeds - Faculty of Business ( email )

Leeds LS2 9JT
United Kingdom

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