Graduation Year

2024

Date of Submission

11-2023

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Fan Yu

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2023 Gavin F Rosser

Abstract

This paper investigates the role private equity backing plays in the long-term performance of portfolio businesses post-exit. Due to the limited data available on performance of portfolio companies post-exit, this paper focuses solely on the public sector where consistent and reliable data is available. After a private equity firm invests in a business it sells off this stake and leaves the company to function on its own; gauging performance post-investment helps to understand the significance of engagement with a private equity firm from the business’ perspective. I hypothesize that private equity backing negatively impacts future performance of portfolio companies. In my research, the results oppose this hypothesis and demonstrate a statistically significant upside when compared to firms with “other” backing types. Without the inclusion of control variables, in a single variable regression, the results of this paper suggest that backing type alone can predict future performance. Further multivariate regressions results delve into this initial finding by offering insight into what specific factors drive these returns. Reconciling these results leads me to conclude that although PE-backed IPOs outperform competitors in the long-run, this outperformance might be subject to change after the PE firm’s initial selloff period expires.

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