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

Hammer, Benjamin and Marcotty-Dehm, Nikolaus and Schweizer, Denis and Schwetzler, Bernhard (2022) Pricing and value creation in private equity-backed buy-and-build strategies. Journal of Corporate Finance. ISSN 0929-1199 (In Press)

[img]
Text (SSRN_id3244189_11_)
SSRN_id3244189_11_.pdf - Accepted Version
Restricted to Repository staff only until 1 January 2050.
Available under License Creative Commons Attribution-NonCommercial-NoDerivs.

Download (1MB)

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.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Corporate Finance
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/1400/1408
Subjects:
ID Code:
176053
Deposited By:
Deposited On:
16 Sep 2022 12:50
Refereed?:
Yes
Published?:
In Press
Last Modified:
16 Sep 2022 12:50