Middle-Market Buyouts

The Palgrave Encyclopedia of Private Equity, Forthcoming

7 Pages Posted: 30 Aug 2023

See all articles by Edoardo Marchesi

Edoardo Marchesi

University of Chicago Booth School of Business

Young Soo Jang

Pennsylvania State University - Smeal College of Business; University of Chicago Booth School of Business

Date Written: June 30, 2023

Abstract

This article surveys empirical studies related to private equity (PE) middle-market buyouts. First, the authors gather a set of empirical evidence that points to systematic differences in real effects between middle-market buyouts and traditional buyouts of large, public firms. Relative to other types of buyouts, middle-market buyouts are associated with stronger employment and productivity growth, supported by enhancements in operational efficiency and management practices. Next, this article highlights one key source of value creation by PE investors in middle-market buyouts: relaxation of financing constraints. PE investors help their portfolio companies access more debt, especially in the form of cash flow-based debt, with lower interest rates and more flexible covenants. Such favorable financing outcomes appear to be enabled by PE investors’ active role in resolving financial distress and their reputation with lenders built through repeated deals. The article concludes with a list of questions that may guide future research on middle-market buyouts.

Keywords: Middle-market buyout, small to mid-sized buyout, private-to-private buyout

JEL Classification: G23

Suggested Citation

Marchesi, Edoardo and Jang, Young Soo, Middle-Market Buyouts (June 30, 2023). The Palgrave Encyclopedia of Private Equity, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4553354 or http://dx.doi.org/10.2139/ssrn.4553354

Edoardo Marchesi

University of Chicago Booth School of Business ( email )

Chicago
United States

HOME PAGE: http://https://www.edoardomarchesi.com/

Young Soo Jang (Contact Author)

Pennsylvania State University - Smeal College of Business ( email )

University Park, PA 16802
United States

University of Chicago Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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