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Pricing and value creation in private equity-backed buy-and-build strategies

Research output: Contribution to Journal/Magazine › Journal article › peer-review

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Pricing and value creation in private equity-backed buy-and-build strategies. / Hammer, Benjamin; Marcotty-Dehm, Nikolaus; Schweizer, Denis et al.
In: Journal of Corporate Finance, Vol. 77, 102285, 31.12.2022.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Hammer, B, Marcotty-Dehm, N, Schweizer, D & Schwetzler, B 2022, 'Pricing and value creation in private equity-backed buy-and-build strategies', Journal of Corporate Finance, vol. 77, 102285. https://doi.org/10.1016/j.jcorpfin.2022.102285

APA

Hammer, B., Marcotty-Dehm, N., Schweizer, D., & Schwetzler, B. (2022). Pricing and value creation in private equity-backed buy-and-build strategies. Journal of Corporate Finance, 77, Article 102285. https://doi.org/10.1016/j.jcorpfin.2022.102285

Vancouver

Hammer B, Marcotty-Dehm N, Schweizer D, Schwetzler B. Pricing and value creation in private equity-backed buy-and-build strategies. Journal of Corporate Finance. 2022 Dec 31;77:102285. doi: 10.1016/j.jcorpfin.2022.102285

Author

Hammer, Benjamin ; Marcotty-Dehm, Nikolaus ; Schweizer, Denis et al. / Pricing and value creation in private equity-backed buy-and-build strategies. In: Journal of Corporate Finance. 2022 ; Vol. 77.

Bibtex

@article{99c3691d1e5d4c04a220b29733df26a1,
title = "Pricing and value creation in private equity-backed buy-and-build strategies",
abstract = "We investigate the pricing and value creation in private equity-backed buy-and-build (B&B) strategies using a sample of 3399 buyouts between 1997 and 2020 as well as proprietary performance data. We find that private equity firms pay sizable premiums for B&B platforms. The transaction multiples are similar to those paid by strategic acquirers for matched targets. Despite paying high premiums, private equity firms generate above-average equity returns in B&B strategies. This is because of both higher top-line growth and multiple expansion. To back up our empirical results and shed light on decision-making in B&B strategies, we present evidence from the field. Survey results from 32 interviews with private equity managers provide novel insights into B&B rationale, valuation practices, pricing, value creation, acquisition processes and execution.",
keywords = "Leveraged buyout, M&A, Add-on, Tuck-in, Multiple expansion",
author = "Benjamin Hammer and Nikolaus Marcotty-Dehm and Denis Schweizer and Bernhard Schwetzler",
year = "2022",
month = dec,
day = "31",
doi = "10.1016/j.jcorpfin.2022.102285",
language = "English",
volume = "77",
journal = "Journal of Corporate Finance",
issn = "0929-1199",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - Pricing and value creation in private equity-backed buy-and-build strategies

AU - Hammer, Benjamin

AU - Marcotty-Dehm, Nikolaus

AU - Schweizer, Denis

AU - Schwetzler, Bernhard

PY - 2022/12/31

Y1 - 2022/12/31

N2 - We investigate the pricing and value creation in private equity-backed buy-and-build (B&B) strategies using a sample of 3399 buyouts between 1997 and 2020 as well as proprietary performance data. We find that private equity firms pay sizable premiums for B&B platforms. The transaction multiples are similar to those paid by strategic acquirers for matched targets. Despite paying high premiums, private equity firms generate above-average equity returns in B&B strategies. This is because of both higher top-line growth and multiple expansion. To back up our empirical results and shed light on decision-making in B&B strategies, we present evidence from the field. Survey results from 32 interviews with private equity managers provide novel insights into B&B rationale, valuation practices, pricing, value creation, acquisition processes and execution.

AB - We investigate the pricing and value creation in private equity-backed buy-and-build (B&B) strategies using a sample of 3399 buyouts between 1997 and 2020 as well as proprietary performance data. We find that private equity firms pay sizable premiums for B&B platforms. The transaction multiples are similar to those paid by strategic acquirers for matched targets. Despite paying high premiums, private equity firms generate above-average equity returns in B&B strategies. This is because of both higher top-line growth and multiple expansion. To back up our empirical results and shed light on decision-making in B&B strategies, we present evidence from the field. Survey results from 32 interviews with private equity managers provide novel insights into B&B rationale, valuation practices, pricing, value creation, acquisition processes and execution.

KW - Leveraged buyout

KW - M&A

KW - Add-on

KW - Tuck-in

KW - Multiple expansion

U2 - 10.1016/j.jcorpfin.2022.102285

DO - 10.1016/j.jcorpfin.2022.102285

M3 - Journal article

VL - 77

JO - Journal of Corporate Finance

JF - Journal of Corporate Finance

SN - 0929-1199

M1 - 102285

ER -