عنوان

Can Private Equity Investments Succeed without Innovation? Strategic Decision Guidelines to Enhance Business Acquisition Performance

TLpq2451346141

انگلیسی

Can Private Equity Investments Succeed without Innovation? Strategic Decision Guidelines to Enhance Business Acquisition Performance

[Thesis]

Hersh, Israel J.

Deeb, Ruba

University of Bridgeport

2020

103

Ph.D.

University of Bridgeport

2020

There is sufficient evidence that many private equity (PE) leveraged buyouts (LBOs) fail financially and during this process, destroy significant value for their investors, employees, partners, suppliers, customers, and the economy in the communities in which these businesses operate. PE firms acquire companies and manage them for a short time-period, typically under 7 years, for the purpose of selling them at a higher price and with a high return on investment (ROI). The capital structure of such an acquisition is shaped as an LBO via an investment mix of 20-30 percent in equity and 70-80 percent in debt, which forces the LBO to assume a large debt. During the PE-LBO ownership period, PE partners focus on improving the LBO performance and on increasing its valuation with the objective of exiting the investment with large ROIs for their investors. To facilitate their objectives, the PE firm aligns the LBO's leadership with its goals through changes in the leadership team and creative incentive plans. This research study investigates the influence of PE on innovation in PE LBOs, exploring factors that impact innovation and linking them to reasons for acquisition failures. Primarily, factors studied herein explore hypotheses about the effects of short-term ownership, management restructuring, management incentive plans, and debt size on new product development and innovation. Through the implementation of case study research utilizing surveys of LBO executives, this study uncovers challenges and opportunities that impact PE LBO acquisitions and gleans insight into potential mechanisms for successful financial outcomes. As a result, this study details a rigorous, strategic, and systematic platform that highlights three PE engagement phases with an LBO company. These phases include the acquisition phase, the planning phase, and the execution phase. This platform facilitates decision making and provides guidelines and recommendations to help increase leadership focus on innovation and enhance the success rate of related investments and the future success of LBOs. Notably, these guidelines are also applicable to the broader merger and acquisition (M&A) market.

Finance

Management

Deeb, Ruba

Hersh, Israel J.

p

[Thesis]

276903

a

Y