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Project

Syndication of European buyout transactions: the determinants of syndication, the structure of the syndicate, and impact on the performance of the acquired target companies.

The first chapter of the doctoral dissertation empirically examines under what conditions buyout financiers establish a syndicate and how they structure those syndicates. We find significant evidence that lead financiers syndicate so as to enjoy the various benefits of syndication and establish a structure that minimizes the costs of syndication while further enhancing its benefits. Finally, chapter one provides compellingevidence that the post-buyout profitability and growth of target firms are superior when buyouts are syndicated and when these syndicates are structured to limit conflicts of interest, while further maximizing syndication benefits. Chapter two empirically investigates which investor characteristics lead financiers take into account when selecting syndicate partners to join the buyout syndicate. The results reveal that leadfinanciers prefer syndicate partners with whom they developed a prior relationships, either directly or indirectly, as these investors can be considered more trustworthy. Besides, lead financiers prefer investors with expertise in the target industry and also favor syndicate partners with knowledge about the legal tradition and the culture of the target country, especially when having themselves only limited knowledge about target-country institutions. In addition, financiers prefer syndicate partners who are similar in terms of cognition and status, as cooperating is likely to be more effective in this case. Chapter two finally demonstrates that these partnering choices have genuine economic consequences for target companies. Finally, chapter three empirically investigates whether buoyant market conditions in the buyout industry can at least in part explain why target-firm performance on average deteriorates for buyouts in Europe. This chapter provides compelling evidence that ex-ante buoyant market conditions explain the average deterioration in target profitability after the buyout in Europe, as the industry-adjusted change in target profitability is significantly more positive for deals executed during cold market conditions. Interestingly, target performance is still positively affected for target companies sponsored in hot markets when backed by investors with substantial knowledge about target-country institutions.
Date:1 Oct 2008 →  31 Dec 2013
Keywords:Private equity, Venture capital, Performance, Buyout, Agency problems, Syndication
Disciplines:Applied economics
Project type:PhD project