Private Equity Lemons? Evidence on Value Creation in Secondary Buyouts
European Financial Management, Forthcoming
Posted: 12 Jan 2012
There are 2 versions of this paper
Private Equity Lemons? Evidence on Value Creation in Secondary Buyouts
Date Written: January 12, 2012
Abstract
This paper analyses whether secondary buyouts have a value creation profile and offer equity returns different to that of primary buyouts. Using a sample of 2,456 buyout transactions (including 448 secondary buyouts), we find no evidence that secondary buyouts generate lower equity returns or offer fundamentally lower operational value creation potential. However, we can show that secondary buyouts obtain 28-30% more leverage (measured in terms of debt / EBITDA) than primary buyouts, even after having controlled for debt market conditions. Furthermore, we find evidence that secondary buyouts are 6-9% more expensive than other buyouts.
Keywords: secondary buyouts, private equity, value creation
JEL Classification: G11, G24, G34
Suggested Citation: Suggested Citation