What determines the exit decision for leveraged buyouts?

• Type: Article in International Scientific Journal
• Date: 2015

Authors

Miguel Augusto Sousa (Author) FEP; Tim Jenkinson (Author) Other

Journal

Title: JOURNAL OF BANKING & FINANCE

Vol. 59

Pages: 399-408

ISSN: 0378-4266

Publisher: Elsevier

Indexing

ISI Web of Knowledge - 20 Citations

Scopus - 30 Citations

Other information

Authenticus ID: P-00G-E1Q

DOI: 10.1016/j.jbankfin.2015.06.007

Abstract (EN): How and when to exit portfolio company investments are critical choices facing private equity funds. In this paper we analyze 1022 European private equity exits, using information on fund and portfolio company characteristics, and on conditions in capital markets. For over 43% of the exits, private equity funds sold to each other and we analyze why such secondary buyouts have gained in popularity relative to IPOs and sales to corporate acquirers. We find that the exit route depends on various portfolio company characteristics, and that conditions in the debt and equity markets have a strong influence on exit choice. The existing literature has tended to portray the IPO is the "preferred" exit route. However, our analysis suggests this is mistaken: private equity funds take advantage of 'windows of opportunity', and the exit route that maximizes value varies with market conditions.

Type (Professor's evaluation): Scientific