Do Secondary Buyouts Create Value? Evidence from the United Kingdom



We examine whether secondary buyouts create value for financial sponsors and target companies over the entire holding period, from the time of a buyout to exit. Using a unique hand-collected dataset of 101 secondary buyouts from the United Kingdom completed between 1999 and 2008, we find evidence that these transactions generate statistically significant returns for their sponsors. In contrast, operating performance for the target companies does not seem to improve or even worsens, depending on the measure. Firm pre-buyout performance, improved governance, and, to a smaller degree, higher leverage and monitoring by private equity owners play a role in explaining the cross sectional variation in the post-SBO target performance over the life of the deal.
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Agnieszka Markiewicz
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