Public to private transactions, private equity and financial health in the UK: an empirical analysis of the impact of going private

Charlie Weir (), Peter Jones () and Mike Wright

Journal of Management & Governance, 2015, vol. 19, issue 1, 112 pages

Abstract: Using a hand collected data set of 138 buy-outs, this paper presents the first analysis of the impact effects of public to private transactions (PTPs) in the UK during a period (1998–2004) in which PTPs became a significant part of the market for corporate control. We find that for all PTPs there is a significant improvement in financial health in the post deal years relative to the year before going private. We also find that there is a significant improvement in the financial health of PTPs relative to firms remaining public. The analysis of the individual elements of the z-score shows that there are significant improvements in working capital and liquidity post deal. Profitability, however, shows significant declines in a number of the post deal years. We also find that both private equity (PE) and non PE-backed deals produce improvements in financial health but that there is no difference between the two types of deal. These outcomes provide some support for the Jensen (Am Econ Rev 76:323–329, 1986 , Harv Bus Rev 67:61–74, 1989 ) arguments that going private creates an organizational structure that reduces agency costs. However, they do suggest that the claims that the financial and governance mechanisms imposed by PE providers will produce better outcomes are strictly limited in the second wave of PTPs. Copyright Springer Science+Business Media New York 2015

Keywords: Public to private transactions; Financial health; Private equity (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10997-013-9270-9 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jmgtgv:v:19:y:2015:i:1:p:91-112

Ordering information: This journal article can be ordered from
http://www.springer. ... 29/journal/10997/PS2

DOI: 10.1007/s10997-013-9270-9

Access Statistics for this article

Journal of Management & Governance is currently edited by Lino Cinquini

More articles in Journal of Management & Governance from Springer, Accademia Italiana di Economia Aziendale (AIDEA) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().