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In November 2015 German parliament passed a law regulating delisting offers requiring companies to offer shareholders a compensation at least equal to the six-month volume-weighted average price (VWAP) of the stock. This paper analyzes a sample of delisting offers made under the new regulations. We identify two primary motives for delisting. First, delistings linked to preceding takeover offers aim to pressure remaining shareholders into tendering their shares. Second, majority shareholders, leveraging private information, opt to delist and present an offer to minority shareholders when the stock is undervalued. Since institutional investors are often restricted to holding shares listed on regulated markets, they are effectively forced to accept such offers. Our findings suggest that majority shareholders may use delisting offers to take advantage of significant undervaluation caused by external shocks.
Die Bedeutung von ESG (Environmental-, Social, Governance)-Kriterien hat für Anlageentscheidungen von Investoren deutlich zugenommen. Dabei spielt die Diversität des Managementteams eine wichtige Rolle; dahingegen gilt die Private-Equity-Branche nach wie vor als von „weißen Männern“ dominiert. Vor diesem Hintergrund wird in diesem Beitrag ein Index dargestellt, der nicht nur die Diversität des Managementteams von Fonds abbildet, sondern diese Diversität auch mit der Performance des Fonds verbindet.
“Multiple arbitrage” is an effect on private equity (PE) deal performance connected to buy-and-build (B&B) strategies. Under this strategy, a PE fund acquires a platform company and then sequentially buys other companies (so-called “add ons”) to combine them with the platform company. If the add-on transactions command lower multiples, the average entry multiple of all acquired companies is decreasing with the additional transactions. The reduction of the overall entry multiple contributes positively to the multiple conversion as part of the deal performance. This effect is called multiple arbitrage.
Secondary buyouts (SBOs) appear paradoxical because the surge in SBO activity is met with scepticism from the public and investors regarding their performance. In this paper, we undertake a comprehensive analysis of SBO performance through two distinct lenses: First, we address the prevailing notion of SBOs as “lemons”. These are perceived as opportunities that, following a successful primary buyout (PBO), seemingly leave little room for further value creation. To investigate this “negative correlation hypothesis”, we employ a unique back-to-back sample of 276 cases involving the same firm in both a PBO and an SBO. Analysing the correlation between the internal rate of returns (IRRs) of back-to-back PBO/SBOs, our results do not support the “negative correlation hypothesis”. Second, we directly compare the deal performance of the two related back-to-back buyout rounds. For our back-to-back sample, we find that PBOs display significantly higher IRRs than SBOs. However, after performing a matched comparison adjusting for size and holding period differences, which are two well-known pitfalls of IRR rank orders, our findings suggest that there is no systematic outperformance of SBOs against their PBO comparables. Finally, we analyse differences in operating performance between PBOs and SBOs. Our results do not indicate a significant difference, either based on the back-to-back sample or when comparing PBOs and SBOs against matched public peers. In the light of our findings, we advocate for a reevaluation of the current perception of SBOs. Rather than being dismissed as “second-hand” opportunities, they should be recognised as “second-generation” opportunities deserving closer consideration.
The aim of this study is to explore the relationship between the benefits of having a diverse top management team (TMT) with complementary perspectives, and the potential drawbacks of increased conflicts between team members. Using data of 1,071 fund partners involved in 1,295 buyout deals by 117 funds we find that TMTs with greater diversity in socio-demographic characteristics tend to achieve higher money multiples or internal rate of return (IRR). However, we also observe that greater occupational diversity has a negative net effect on performance. These results suggest that diversity arising from demographic characteristics is generally beneficial, while voluntarily acquired attributes may require additional coordination efforts. Additionally, our study finds that the distribution of team members and the associated diversity levels on individual deals within a fund can impact fund performance. We find an even distribution to be positively related to fund performance for occupational diversity and negatively for socio-demographic diversity. However, for funds with high levels of socio-demographic diversity, even distribution across deals is also positively associated with fund performance. Lastly our findings indicate that CEO involvement positively moderates fund performance, while industry specialization has a negative moderating effect. Overall, our findings could be useful for limited partners and fund-of-funds in investment processes and provide guidance for general partners when making staffing decisions.