Performance of Spanish buyouts

: evidence from a global recession

Abstract

Previous research on the topic of buyouts performance has focused almost entirely on major markets, as the US or the UK. The conclusions are mixed, with some authors agreeing on the buyouts’ superior operating performance and with others focusing on governance and financial engineering changes as drivers of performance. This study aims at evaluating the performance of 21 different Spanish buyouts that occurred in 2006, a year before the financial crisis hit the world. Buyouts were evaluated during a five-year period, aiming at analyzing their performance during recession years and recovery years. Performance was examined considering five variables, organized in three categories: profitability, leverage and efficiency. Combining a propensity score matching instrument, that minimized biases in the construction of matched firms, with a difference-in-difference estimation model, performance was then assessed. Our regression results show that, on average, performance was negative one and three years after the buyout, with signs of positive recovery five years after the operation. Efficiency gains might explain and support the theory of greater performance of buyouts. These results contrast with the performance of other types of private equity investments, whose recuperation after the economic downturn was much longer.

Date of Award	7 Jul 2021
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Ricardo Cunha (Supervisor)