Leveraged Buyouts in the U.K. And Continental Europe: Retrospect and Prospect

ECGI - Finance Working Paper No. 126/2006

CentER Discussion Paper Series No. 2006-70

38 Pages Posted: 21 Jul 2006

See all articles by Mike Wright

Mike Wright

Nottingham University Business School

Tomas Simons

McKinsey & Co. Inc. - Amsterdam Office

Louise Scholes

Loughborough University London

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2006

Abstract

Management buy-outs have become a global phenomenon. This paper examines the key market trends in the UK and Continental Europe and identifies challenges for the future development of the market. Key recent trends include: buy-out funds raised have exceeded funds invested; evidence from Continental Europe indicates an intention by institutional investors to increase their commitment; private equity firms from the United States have become more prominent investors in European buy-outs; increased competition has come from hedge funds and new entrants such as government-sponsored operators, family offices and wealthy entrepreneurs; major changes in deals have been the growth of secondary buy-outs and public-to-private buy-outs; recent lower interest rates have been associated with a rise in debt; size of deal syndicates is increasing in very large deals; average share price reaction to the PTP announcement in the UK during 1997-2003 was 30%; secondary buy-outs have become an important exit route, and there is an increasing number of tertiary or quaternary buy-outs. Future challenges include: realizing the scope for attractive deals from restructuring larger corporations in Continental Europe; encouraging succession planning that will result in buy-outs involving family-owned firms; further differentiation between private equity firms in order to generate upside gains; addressing the competitive challenge to existing financiers from hedge funds; reconciling concerns about the medium term economic performance of European economies and the degree of leverage in buy-out deals; and secondary buy-outs raise major challenges relating to whether managers are buyers or sellers, and the attitudes of limited partners.

Keywords: Public-to-private, going-private, LBO, MBO, IBO, Management buy-ins

JEL Classification: G34, G32

Suggested Citation

Wright, Mike and Simons, Tomas and Scholes, Louise and Renneboog, Luc, Leveraged Buyouts in the U.K. And Continental Europe: Retrospect and Prospect (July 2006). ECGI - Finance Working Paper No. 126/2006; CentER Discussion Paper Series No. 2006-70. Available at SSRN: https://ssrn.com/abstract=918121 or http://dx.doi.org/10.2139/ssrn.918121

Mike Wright

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5257 (Phone)
+44 115 951 5204 (Fax)

Tomas Simons

McKinsey & Co. Inc. - Amsterdam Office ( email )

Amstel 344
Amsterdam, 1017 AS
Netherlands
0031 205513009 (Phone)
0031 205515009 (Fax)

Louise Scholes

Loughborough University London ( email )

Here East
Queen Elizabeth Olympic Park
London, E15 2GZ
Great Britain

Luc Renneboog (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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