{"id":43930,"date":"2017-11-26T16:12:32","date_gmt":"2017-11-26T14:12:32","guid":{"rendered":"https:\/\/newserver.fyb.de\/produkt\/secondary-buyouts-leverage-play-or-real-value-enhancement-potential\/"},"modified":"2017-11-26T16:12:32","modified_gmt":"2017-11-26T14:12:32","slug":"secondary-buyouts-leverage-play-or-real-value-potential","status":"publish","type":"product","link":"https:\/\/www.fyb.de\/en\/produkt\/secondary-buyouts-leverage-play-or-real-value-potential\/","title":{"rendered":"Secondary Buyouts \u2014 Leverage Play or Real Value Enhancement Potential?"},"content":{"rendered":"

Prof. Dr. Dr. Ann-Kris\u00adtin Achleit\u00adner<\/strong> \u2014 Holder of the KfW Endo\u00adwed Chair for Entre\u00adpre\u00adneu\u00adrial Finance\/ Center for Entre\u00adpre\u00adneu\u00adrial and Finan\u00adcial Studies (CEFS), TU Munich<\/p>\n

Chris\u00adtian Figge, M.A.<\/strong> \u2014 Rese\u00adarch Asso\u00adciate Center for Entre\u00adpre\u00adneu\u00adrial and Finan\u00adcial Studies (CEFS), TU Munich<\/p>\n

Jakob Schramm<\/strong> \u2014 Invest\u00adment Mana\u00adger Golding Capi\u00adtal Part\u00adners GmbH, Munich<\/p>\n","protected":false},"excerpt":{"rendered":"

For private equity, 2010 is the year of secon\u00addary buyouts. While this type of buyout was until recently conside\u00adred a pheno\u00adme\u00adnon of the last boom phase, it is now expe\u00adri\u00aden\u00adcing a renaissance.<\/strong><\/p>\n

Private equity funds are incre\u00adasingly under pres\u00adsure to realize their invest\u00adments, but the tradi\u00adtio\u00adnal exit alter\u00adna\u00adti\u00adves of IPOs and trade sales are not very attrac\u00adtive. Often, the only option is to sell the company to a finan\u00adcial inves\u00adtor. This also helps the private equity indus\u00adtry on the buyer side, as it sits on a substan\u00adtial capi\u00adtal stock (mostly coll\u00adec\u00adted before the finan\u00adcial crisis) compared to the still ripp\u00adling M&A market. Moreo\u00adver, in times of uncer\u00adtain econo\u00admic outlook, many private equity funds focu\u00adsed on stable, proven compa\u00adnies that had alre\u00adady been profes\u00adsio\u00adna\u00adli\u00adzed by a prede\u00adces\u00adsor. These dyna\u00admics, as well as the high leverage of buyout finan\u00adcings in the last boom phase 2005 \u2014 2007, have led to skep\u00adti\u00adcism about secon\u00addary buyouts both in acade\u00admia and in prac\u00adtice. Howe\u00adver, while the previous discus\u00adsion could not draw on empi\u00adri\u00adcal analy\u00adses, this article shows that secon\u00addary buyouts offer signi\u00adfi\u00adcant opera\u00adtio\u00adnal value enhance\u00adment poten\u00adtial that is quite compa\u00adra\u00adble to that of primary buyouts, and the returns are not gene\u00adra\u00adted by above-average corpo\u00adrate debt.<\/p>\n

Meaning of Secon\u00addary Buyouts<\/strong><\/p>\n

A corpo\u00adrate tran\u00adsac\u00adtion in which both the buyer and seller are private equity funds is commonly refer\u00adred to as a secon\u00addary buyout. The 62 importance of secon\u00addary buyouts for the private equity market can be esti\u00adma\u00adted by their share of total invest\u00adments. Based on data for the global lever\u00ada\u00adged buyout market from Kaplan and Strom\u00adberg (2009), Figure 1 shows how the share of secon\u00addary buyouts in total invest\u00adments has evol\u00adved over time from 1985 to mid-2007.<\/p>\n

In the first boom phase of private equity, 1985 \u2014 1989, secon\u00addary buyouts still repre\u00adsen\u00adted a vanis\u00adhin\u00adgly small share of only 2% of the total tran\u00adsac\u00adtion value. As the private equity market matu\u00adred, the share of secon\u00addary buyouts increased.<\/p>\n","protected":false},"featured_media":41064,"comment_status":"open","ping_status":"closed","template":"","meta":{"wp_typography_post_enhancements_disabled":false},"product_brand":[],"product_cat":[2452,2506,2512,2513,2518],"product_tag":[1825,1867,1996,2002,2007,2013],"class_list":{"0":"post-43930","1":"product","2":"type-product","3":"status-publish","4":"has-post-thumbnail","6":"product_cat-ebook-en","7":"product_cat-fyb-2011-en","8":"product_cat-christian-figge-m-a-en","9":"product_cat-prof-dr-dr-ann-kristin-achleitner-en","10":"product_cat-jakob-schramm-en","11":"product_tag-christian-figge-en","12":"product_tag-ann-kristin-achleitner-en","13":"product_tag-jakob-schramm-en","14":"product_tag-secondary-buyouts-en","15":"product_tag-value-enhancement-potential","16":"product_tag-capital-stock","17":"pa_sprache-english-3","18":"pa_sprache-german","20":"first","21":"outofstock","22":"taxable","23":"shipping-taxable","24":"purchasable","25":"product-type-variable"},"yoast_head":"\nSecondary Buyouts - Leverage Play or Real Value Enhancement Potential? - FYB Financial Yearbook<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.fyb.de\/en\/produkt\/secondary-buyouts-leverage-play-or-real-value-potential\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Secondary Buyouts - Leverage Play or Real Value Enhancement Potential? - FYB Financial Yearbook\" \/>\n<meta property=\"og:description\" content=\"For private equity, 2010 is the year of secondary buyouts. While this type of buyout was until recently considered a phenomenon of the last boom phase, it is now experiencing a renaissance. Private equity funds are increasingly under pressure to realize their investments, but the traditional exit alternatives of IPOs and trade sales are not very attractive. Often, the only option is to sell the company to a financial investor. This also helps the private equity industry on the buyer side, as it sits on a substantial capital stock (mostly collected before the financial crisis) compared to the still rippling M&A market. Moreover, in times of uncertain economic outlook, many private equity funds focused on stable, proven companies that had already been professionalized by a predecessor. These dynamics, as well as the high leverage of buyout financings in the last boom phase 2005 - 2007, have led to skepticism about secondary buyouts both in academia and in practice. However, while the previous discussion could not draw on empirical analyses, this article shows that secondary buyouts offer significant operational value enhancement potential that is quite comparable to that of primary buyouts, and the returns are not generated by above-average corporate debt. Meaning of Secondary Buyouts A corporate transaction in which both the buyer and seller are private equity funds is commonly referred to as a secondary buyout. The 62 importance of secondary buyouts for the private equity market can be estimated by their share of total investments. Based on data for the global leveraged buyout market from Kaplan and Stromberg (2009), Figure 1 shows how the share of secondary buyouts in total investments has evolved over time from 1985 to mid-2007. In the first boom phase of private equity, 1985 - 1989, secondary buyouts still represented a vanishingly small share of only 2% of the total transaction value. 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