Determinants of Buyouts in Private Equity Firms

Louise Nordström and Daniel Wiberg

No 207, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: Private equity companies have become a major force in the economic landscape. Financial- and operational-engineering are innovative characteristics of this emerging method of finance. The existing empirical data provide strong evidence that private equity activity contribute positively to the rapid growth of companies. In this paper probability of private equity funded buyouts in the Nordic market is investigated. Operationally this is done by applying a logit model on a number of firm specific accounting measures. The main finding is that it is the dynamics of these variables in the target firms that are important for potential buyouts. That is, the growth measured as change in employees, change in the debt equity level, and the change in EBITDA margin, all have a significant effect on the probability of being bought by a private equity firm.

Keywords: private equity; buyouts; performance (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2009-12-18
New Economics Papers: this item is included in nep-cfn and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:cesisp:0207

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