Bond Disclosure as a Window into Private Equity: A Methodology and First Evidence from the European Market

Abstract

Research on the operations and financing of companies owned by private equity funds remains challenging due to limited quantity and inconsistent quality of available data. This paper proposes using bond prospectuses as a source of non standard data that is comprehensive, verified, and generally accessible. To this end, a dataset of European firms representing €430 billion in capital markets debt was created and applied to examine a range of relevant topics. First, this highlights a marked expansion in bond financing by sponsored firms since the global financial crisis, which serves as this study’s quantitative basis. Second, it shows increasing leverage ratios and decreasing debt to enterprise value at the time of buyouts over the past 15 years; together, these movements reflect higher purchase prices relative to fundamental asset value during an extended credit cycle expansion. Third, the analysis demonstrates greater post acquisition increases in employee numbers for private than for public targets; conversely, it also hints at the resolution of agency costs typically associated with public firms, as indicated by differences in earnings per employee metrics. Together, the theoretical framework of this study and its early application set the foundation for further research in reliance on bond disclosure.

Keywords: Private Equity, High Yield Bonds, Private Capital, Law and Finance, Empirical Corporate Finance, Alternative Data

JEL Classification: G23, G32, J49