Throughout this thesis Ive provided evidence against the unwarranted claim that

Throughout this thesis ive provided evidence against

This preview shows page 71 - 74 out of 74 pages.

Throughout this thesis, I’ve provided evidence against the unwarranted claim that private equity houses are merely corporate raiders, which plunder profitable companies and fest via the sale of their most mouth-watering assets. All measures relating to operating efficiency appear to be improving: working capital is managed more accurately, employment is boosted by strategies focusing on growth, long-term competitiveness is unaltered as spending level s on R&D, advertising and maintenance are untouched. As far as financial returns are concerned, numerous study see it eye-to- eye on the fact that private equity houses fall short of the market benchmark if we subtract fee payments. However, buyouts do indeed create value gross of fees. A strong persistence is returns is present, with larger funds consistently capable of achieving abnormal returns. Despite all the endeavors of previous literature, most issues remain still unresolved and could be the topic for some interesting future research Private firms are less affected by agency costs due to concentrated ownership and management. It would be useful to analyze productivity gains in just this class of businesses Additional studies should consider the impact of different regulatory contexts on private equity’s performance and investments. For instance, GP in the United States tend to be an independent group of specialists while in Europe buyout funds are often divisions of banks and insurance companies. A thorough study concerning the relation between human capital factors and financial or economic returns is still missing. Fourth, the emergence of second-lien debt, carrying less covenants but sharing the collateral with senior obligations, has brought about the possibility of longer maturities and more
Image of page 71
Bachelor’s degree t hesis in Economics and Business 5/7/2010 Flavio Benedetti 73 attractive rates, but also a pending conflict of interest between junior and senior debt providers. The resurgence of club deals has enabled private equity firms to carry out acquisitions that would have otherwise been inaccessible on a stand-alone basis. However, coordination problems may come up when restructuring of distressed buyouts is required. On top of that, an additional facet of syndicated or club deals regards their potential effect upon competition in the market and hence the prices paid for any given deal: the drawbacks of possible collusion have to be judged against the benefits derived from improved corporate governance and mechanisms. Lastly, studies controlling the performance of secondary and foreign buyouts are needed.
Image of page 72
Bachelor’s degree t hesis in Economics and Business 5/7/2010 Flavio Benedetti 74 BIBLIOGRAPHY “If private equity sized up your business”, Robert C. Pozen, Harvard Business Review , 2007 “Private equity: boom or bust?”, Viral Acharya, Julian Franks, Henri Servaes, Journal of Applied Corporate Finance , 2007 “Beyond the Berle and Means Paradigm: Private Equity and the New Capitalist Order”, Stephen Diamond, 2007 The performance of private equity funds”, Ludovic Phalippou and Maurizio Zollo, September 2005 “Efficiency gains in unsuccessful management buyouts”, Eli Ofek, The Journal of Finance , June 1994 “Assessing the impact of management buyouts on economic efficiency
Image of page 73
Image of page 74

You've reached the end of your free preview.

Want to read all 74 pages?

  • Fall '18
  • Test, Flavio Benedetti

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes