What Drives Private-Equity Performance Persistence? New Deal-Level Evidence

55 Pages Posted: 24 Jul 2024

See all articles by Axel Buchner

Axel Buchner

ESCP Business School

Susanne Espenlaub

The University of Manchester - Division of Accounting and Finance

Abdul Mohamed

University of Leeds - Faculty of Business

Abstract

We examine the performance persistence of private-equity (PE) deals using a novel approach that decomposes deal performance into five components of portfolio-company performance. Based on deal-level data during 1974-2017, we find that performance and persistence are significantly driven by the ‘leveraging’ component reflecting portfolio companies’ ability to bear high debt burdens at investment and reduce leverage before PE backers exit. Performance persistence declines during (2000-2007) but resurges post-2007. Performance persistence and persistence in leveraging are higher for less experienced PE backers. Our results are novel, robust and of interest to academics, practitioners and investors.

Keywords: Buyout, fund performance, performance decomposition, performance persistence, Private Equity

Suggested Citation

Buchner, Axel and Espenlaub, Susanne K. and Mohamed, Abdul, What Drives Private-Equity Performance Persistence? New Deal-Level Evidence. Available at SSRN: https://ssrn.com/abstract=4904483 or http://dx.doi.org/10.2139/ssrn.4904483

Axel Buchner (Contact Author)

ESCP Business School ( email )

Heubnerweg 8-10
Berlin, AK Berlin 14059
Germany

Susanne K. Espenlaub

The University of Manchester - Division of Accounting and Finance ( email )

Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom
44 161 275 4026 (Phone)

Abdul Mohamed

University of Leeds - Faculty of Business ( email )

Leeds LS2 9JT
United Kingdom

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