Value Creation Drivers in Private Equity Buyouts: Empirical Evidence from Europe

Most of the existing research on value creation drivers in private equity buyouts is restricted to the U.S. and the U.K. In addition, most of the generally applied methods for measuring the importance of different value creation drivers do not comprehensively account for all relevant aspects, such as a clear separation between operating and financial risk. This article tries to fill these research gaps and analyzes value creation drivers in European (continental Europe and U.K.) buyouts from the perspective of private equity sponsors using a unique dataset of 206 realized transactions. The methodology used allows the authors to separate the value contribution of leverage on private equity sponsors’ returns from operational improvements and market effects. The results of the empirical analysis show that one-third of the private equity sponsors’ returns can be attributed to the use of leverage, whereas two-thirds are due to operational and market effects. Moreover, value creation drivers are analyzed with respect to different time periods, transaction sizes, and general market conditions. The results provide important insights into the private equity business model in Europe.     «

Most of the existing research on value creation drivers in private equity buyouts is restricted to the U.S. and the U.K. In addition, most of the generally applied methods for measuring the importance of different value creation drivers do not comprehensively account for all relevant aspects, such as a clear separation between operating and financial risk. This article tries to fill these research gaps and analyzes value creation drivers in European (continental Europe and U.K.) buyouts from the...     »