KTH/CESIS Working Paper Series in Economics and Institutions of Innovation
Determinants of Buyouts in Private Equity Firms
() and Daniel Wiberg
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; (follow links to similar papers)
JEL-Codes: G32; G34; (follow links to similar papers)
25 pages, December 18, 2009
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