Value Creation in Private Equity

Alexander Ljungqvist (), Çağatay Bircan and Markus Biesinger

No 14676, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We open up the black box of value creation in private equity with the help of confidential information on value creation plans and their execution. Plans are tailored to each portfolio company’s needs and circumstances, have become more hands-on, and vary with deal type, ownership, growth strategy, and geographic focus. Successful execution is subject to resource constraints, economies of specialization, and diminishing returns, and varies systematically across funds. Successful execution is a key driver of investor returns, especially in growth, buyout, and secondary deals. Company operations and profitability improve in ways consistent with successful execution, even beyond PE funds’ exit.

Keywords: Private equity; Venture capital; Growth investing; Secondaries; Value creation; Financial returns; Machine learning (search for similar items in EconPapers)
JEL-codes: G11 G24 G30 G32 L26 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-cfn, nep-cmp and nep-fmk
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Citations: View citations in EconPapers (6)

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