Buyouts: A Primer

Tim Jenkinson, Hyeik Kim and Michael Weisbach

No 29502, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper provides an introduction to buyouts and the academic literature about them. Buyouts are initiated by “buyout funds”, which are limited partnerships raised from mostly institutional investors. The funds earn returns for their investors by improving the operations of the firms they acquire and exiting them for a profit. Buyout funds have grown substantially and currently raise more than $400 billion annually in capital commitments. We first discuss the institutional environment that developed to foster such buyouts and to provide incentives for general partners and firm managers to earn returns for the fund’s investors. We then describe various strategies that funds use to increase the values of their portfolio companies. The paper provides up to date statistics on all aspects of the buyout industry. Finally, we present a summary of the academic literature on buyouts. This literature has paid particular attention to the extent to which buyouts earn risk-adjusted abnormal returns for their investors, as well as the sources of those returns.

JEL-codes: G24 G34 (search for similar items in EconPapers)
Date: 2021-11
New Economics Papers: this item is included in nep-cwa
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Working Paper: Buyouts: A Primer (2021)
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