Determinants of Private Equity-backed Delistings: An Empirical Investigation of the Determinants Affecting the Likelihood of Private Equity-backed Bids on Publicly Traded Firms

Marc Bregneberg & Peter Christian Jensen

Student thesis: Master thesis


This thesis studies the determinants of private equity bids on publicly listed firms in Europe by studying firm characteristics of 161 unique private equity targets from 2004 – 2015 and a matched sample of comparable firms which were not targeted by private equity investors. Through a theoretical examination of traditional and agency theory related going private motives and an empirical review of previous studies, we develop seven testable hypotheses which are investigated using multivariate logistic regression analysis. From our analysis, we find evidence that stable free cash flows, lower firm sizes, dispersed ownership, higher debt collateralization possibilities and higher levels of sales growth increase the likelihood of being targeted by private equity investors. The impact of ownership concentration is analyzed through multiple dimensions, where we conclude a significant negative effect from large shareholders and concentrated ownership. Supplementary, we find that large ownership stakes held by insiders reduce the potential for value creation through a reduction of agency costs and ultimately decrease the attractiveness among private equity investors. Conversely, our results find no evidence of the impact from stock liquidity, undervaluation, levels of free cash flows and profitability. Similarly, by challenging previous studies which find pre-existing leverage significant, we provide findings suggesting that this aspect has no impact on the likelihood of a private equity-backed going private bid. From a series of modifications of our dataset, we contribute to the existing literature by finding new indications of how investor motives are affected by the global financial crisis of 2007 - 2008 and by structural differences between UK and the rest of Europe. The thesis is concluded by a discussion of limitations and related suggestions for future research within the field of private equity-backed going private transactions.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2018
Number of pages144