Leveraged Buyouts in the U.K. and Continental Europe

Retrospect and Prospect

M. Wright, L.D.R. Renneboog, T. Simons, L. Scholes

Research output: Book/ReportReportProfessional

Abstract

Abstract: Management buy-outs have become a global phenomenon. This paper examines the key market trends in the UK and Continental Europe and identifies challenges for the future development of the market. Key recent trends include: buy-out funds raised have exceeded funds invested; evidence from Continental Europe indicates an intention by institutional investors to increase their commitment; private equity firms from the United States have become more prominent investors in European buy-outs; increased competition has come from hedge funds and new entrants such as government-sponsored operators, family offices and wealthy entrepreneurs; major changes in deals have been the growth of secondary buy-outs and public-to-private buy-outs; recent lower interest rates have been associated with a rise in debt; size of deal syndicates is increasing in very large deals; average share price reaction to the PTP announcement in the UK during 1997-2003 was 30%; secondary buy-outs have become an important exit route, and there is an increasing number of tertiary or quaternary buy-outs. Future challenges include: realizing the scope for attractive deals from restructuring larger corporations in Continental Europe; encouraging succession planning that will result in buy-outs involving family-owned firms; further differentiation between private equity firms in order to generate upside gains; addressing the competitive challenge to existing financiers from hedge funds; reconciling concerns about the medium term economic performance of European economies and the degree of leverage in buy-out deals; and secondary buy-outs raise major challenges relating to whether managers are buyers or sellers, and the attitudes of limited partners. Keywords: Public-to-private, going-private, LBO, MBO, IBO, Management buy-ins JEL Code: G34, G32
Original languageEnglish
Place of PublicationBrussels
PublisherECGI
Publication statusPublished - 2006

Publication series

NameECGI Working Paper
No.126/2006

Fingerprint

Buy-outs
Leveraged buyouts
Private equity
Buy-out
Hedge funds
Share prices
Entrepreneurs
Announcement
Going private
Management buy-ins
Management buyouts
Investors
Institutional investors
Managers
Key words
Price reaction
Debt
Interest rates
New entrants
Succession planning

Cite this

Wright, M., Renneboog, L. D. R., Simons, T., & Scholes, L. (2006). Leveraged Buyouts in the U.K. and Continental Europe: Retrospect and Prospect. (ECGI Working Paper; No. 126/2006). Brussels: ECGI.
Wright, M. ; Renneboog, L.D.R. ; Simons, T. ; Scholes, L. / Leveraged Buyouts in the U.K. and Continental Europe : Retrospect and Prospect. Brussels : ECGI, 2006. (ECGI Working Paper; 126/2006).
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Wright, M, Renneboog, LDR, Simons, T & Scholes, L 2006, Leveraged Buyouts in the U.K. and Continental Europe: Retrospect and Prospect. ECGI Working Paper, no. 126/2006, ECGI, Brussels.

Leveraged Buyouts in the U.K. and Continental Europe : Retrospect and Prospect. / Wright, M.; Renneboog, L.D.R.; Simons, T.; Scholes, L.

Brussels : ECGI, 2006. (ECGI Working Paper; No. 126/2006).

Research output: Book/ReportReportProfessional

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AB - Abstract: Management buy-outs have become a global phenomenon. This paper examines the key market trends in the UK and Continental Europe and identifies challenges for the future development of the market. Key recent trends include: buy-out funds raised have exceeded funds invested; evidence from Continental Europe indicates an intention by institutional investors to increase their commitment; private equity firms from the United States have become more prominent investors in European buy-outs; increased competition has come from hedge funds and new entrants such as government-sponsored operators, family offices and wealthy entrepreneurs; major changes in deals have been the growth of secondary buy-outs and public-to-private buy-outs; recent lower interest rates have been associated with a rise in debt; size of deal syndicates is increasing in very large deals; average share price reaction to the PTP announcement in the UK during 1997-2003 was 30%; secondary buy-outs have become an important exit route, and there is an increasing number of tertiary or quaternary buy-outs. Future challenges include: realizing the scope for attractive deals from restructuring larger corporations in Continental Europe; encouraging succession planning that will result in buy-outs involving family-owned firms; further differentiation between private equity firms in order to generate upside gains; addressing the competitive challenge to existing financiers from hedge funds; reconciling concerns about the medium term economic performance of European economies and the degree of leverage in buy-out deals; and secondary buy-outs raise major challenges relating to whether managers are buyers or sellers, and the attitudes of limited partners. Keywords: Public-to-private, going-private, LBO, MBO, IBO, Management buy-ins JEL Code: G34, G32

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Wright M, Renneboog LDR, Simons T, Scholes L. Leveraged Buyouts in the U.K. and Continental Europe: Retrospect and Prospect. Brussels: ECGI, 2006. (ECGI Working Paper; 126/2006).