Graduation Year
2015
Date of Submission
12-2014
Document Type
Campus Only Senior Thesis
Degree Name
Bachelor of Arts
Department
Economics
Reader 1
Eric Hughson
Terms of Use & License Information
Rights Information
© 2014 Dante Quazzo
Abstract
Using private firm financial data, I compare operational improvements in public-to-private and private-to-private leveraged transactions in Western Europe between 2003 and 2010. Results are consistent with the recent literature and find operational gains to be significantly smaller then when buyouts were originally analyzed by Jensen (1989) and Kaplan (1989). Public firms experience an increase in raw EBITDA margin of 7.2 percentage points three years post-buyout, while a doubling of firm size yields an increase in EBITDA margin of 4.6 percentage points in year three post-buyout. Using industry-adjusted data, prior corporate form is positive and significant in year two post-buyout. Contrary to prior literature’s expectations, governance state does not impact increases in net profit margin or return on assets. My analysis offers support for the free cash flow theory, as the positive and significant effect of a public structure on EBITDA margin suggests that public firms have greater growth potential for private equity investors and more agency costs than their private counterparts.
Recommended Citation
Quazzo, Dante, "Examining Gains in Operational Efficiency in Public-to-Private and Private-to-Private Transactions" (2015). CMC Senior Theses. 1000.
https://scholarship.claremont.edu/cmc_theses/1000
This thesis is restricted to the Claremont Colleges current faculty, students, and staff.