Understanding value generation in buyouts

Oliver Gottschalg () and Achim Berg
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Oliver Gottschalg: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

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Abstract: Buyouts have been described as a specific form of financial acquisition that leads to potentially substantial, but also highly volatile returns to equity investors. Previous research has illustrated a number of mechanisms through which buyouts cause increases or decreases in company value. Besides the traditional mechanisms like improved governance or incentive systems, more innovative and entrepreneurial levers like increasing strategic distinctiveness and mentoring are examined. While it is important to understand the performance impact of each of these levers individually, we are still missing a comprehensive framework that captures the full complexity of the buyout value generation process and recognizes interdependences between various factors. In this paper, we develop a three-dimensional conceptual framework for value generation in buyouts that categorizes and links the different levers of buyouts value generation. This framework provides the basis to take a look beyond individual value levers and sheds light on the underlying strategic logic of buyouts. We then review the literature on buyouts and categorize previously identified levers of value generation according to our framework. At the same time, we identify a number of levers that have received little attention in the academic literature so far or still lack convincing empirical support for their performance impact. Building upon this assessment of the status quo in research in buyout value generation, we outline an agenda for future research.

Keywords: Private equity; Buyout; Value generation (search for similar items in EconPapers)
Date: 2005-01-01
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Citations: View citations in EconPapers (7)

Published in Journal of Restructuring Finance, 2005, Vol. 2, n° 1, pp. 9-37. ⟨10.1142/S0219869X05000221⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00458714

DOI: 10.1142/S0219869X05000221

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