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Private equity investments and value creation in small and medium-sized enterprises

  • This chapter examines the enterprise value growth of private equity (PE)-backed buyouts in small and medium-sized enterprises (SMEs). Using a comprehensive sample of PE buyouts from 1997 to 2016 in 59 countries, we find that enterprise value growth rates are significantly higher if the portfolio firm is a small or medium-sized enterprise prior to the buyout. These results also hold for subsequent buyout rounds, i.e., the enterprise value growth of both the primary and secondary buyout is higher if the portfolio firm is a SME prior to the initial buyout. Moreover, we show that good access to finance, management buyouts, and SME investments by large funds have a negative effect on SMEs’ enterprise value growth, whereas a PE firm’s venture capital focus reinforces the positive enterprise value growth of SME portfolio firms. Our results are robust to different tests designed to mitigate selection concerns.

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Document Type:Part of a Book
Author:Benjamin HammerORCiD, Nils Härtel, Suleiman Naiem, Bernhard SchwetzlerORCiD
Editor:Tony Klein, Sven Loßagk, Mario Straßberger, Thomas Walther
Chairs and Professorships:Chair of Financial Management
Parent Title (English):Modern finance and risk Management : Festschrift in Honour of Hermann Locarek-Junge (Transformations in banking, finance and regulation ; volume 4)
Place of publication:Singapur
Publisher:World Scientific
First Page:137
Last Page:170
Year of first Publication:2022
Content Focus:Academic Audience
Licence (German):License LogoUrheberrechtlich geschützt