E-Book, Englisch, Band 22, 253 Seiten, eBook
Hoffmann German Buyouts Adopting a Buy and Build Strategy
2007
ISBN: 978-3-8349-9634-3
Verlag: Betriebswirtschaftlicher Verlag Gabler
Format: PDF
Kopierschutz: 1 - PDF Watermark
Key Characteristics, Value Creation and Success Factors
E-Book, Englisch, Band 22, 253 Seiten, eBook
Reihe: Hallesche Schriften zur Betriebswirtschaft
ISBN: 978-3-8349-9634-3
Verlag: Betriebswirtschaftlicher Verlag Gabler
Format: PDF
Kopierschutz: 1 - PDF Watermark
Within the frame of a case study and questionnaire-based research, Nils Hoffmann investigates the key characteristics of buy and build strategies affected by private equity investors in Germany between 1998 and 2003. The author analyzes which value drivers and management strategies financial sponsors use to generate the return targeted. Furthermore, the research presented provides evidence concerning key success factors of the most profitable buy and build strategies.
Dr. Nils Hoffmann promovierte bei Prof. Dr. Reinhart Schmidt am Lehrstuhl für Finanzwirtschaft und Bankbetriebslehre der Martin-Luther-Universität Halle-Wittenberg. Er ist Associate Principle bei McKinsey & Company, Inc. in Düsseldorf.
Zielgruppe
Research
Weitere Infos & Material
1;Foreword;6
2;Preface;8
3;Table of contents;10
4;List of figures;14
5;List of tables;16
6;List of abbreviations;18
7;1. Introduction;20
7.1;1.1. Context of research topic;20
7.2;1.2. Research gaps and objective;21
7.3;1.3. Research approach;22
7.4;1.4. Structure of document;23
8;2. Introduction to buyouts;25
8.1;2.1. Definition and delineation of different types of buyouts;25
8.1.1;2.1.1. Definition;25
8.1.2;2.1.2. Delineation of different types of buyouts;25
8.1.2.1;2.1.2.1. Types of financing;25
8.1.2.2;2.1.2.2. Types of buyer;32
8.1.2.3;2.1.2.3. Types of deal source;35
8.1.3;2.1.3. Conclusion;40
8.2;2.2. Key participants in the buyout market;40
8.2.1;2.2.1. Investors;41
8.2.2;2.2.2. Funds of funds;41
8.2.3;2.2.3. Private equity firms;42
8.2.4;2.2.4. Target companies;44
8.2.5;2.2.5. Conclusion;45
8.3;2.3. Historic development in relevant buyout markets;46
8.3.1;2.3.1. United States of America;46
8.3.2;2.3.2. United Kingdom;48
8.3.3;2.3.3. Germany;50
8.3.4;2.3.4. Conclusion;51
9;3. Theoretical background for buy-and-build strategies;53
9.1;3.1. Definition and delineation of buy-and-build strategies;53
9.1.1;3.1.1. Definition;53
9.1.2;3.1.2. Delineation of buy-and-build strategies;54
9.1.2.1;3.1.2.1. Types of M&A strategies;54
9.1.2.2;3.1.2.2. Types of buy-and-build strategies;58
9.1.3;3.1.3. Conclusion;58
9.2;3.2. Value creation in buyouts and M&A;59
9.2.1;3.2.1. Definition and measurement of value creation;59
9.2.1.1;3.2.1.1. Shareholder value approach;59
9.2.1.2;3.2.1.2. Alternative approaches for measuring value creation;62
9.2.2;3.2.2. Supporting prerequisites for value creation: agency approach;64
9.2.2.1;3.2.2.1. Introduction to agency theory;65
9.2.2.2;3.2.2.2. Buyouts in the context of agency theory;65
9.2.3;3.2.3. Delineation of value drivers in stand-alone buyouts;69
9.2.3.1;3.2.3.1. Types of value drivers;70
9.2.3.2;3.2.3.2. Existing empirical findings;76
9.2.4;3.2.4. Delineation of synergies in M&A;77
9.2.4.1;3.2.4.1. Definition;78
9.2.4.2;3.2.4.2. Types of synergies;79
9.2.4.3;3.2.4.3. Existing empirical findings;85
9.2.5;3.2.5. Conclusion;87
9.3;3.3. Success factors for value creation in buyouts and M&A;89
9.3.1;3.3.1. Success factor research in business science;89
9.3.1.1;3.3.1.1. Definition;90
9.3.1.2;3.3.1.2. Methods for identifying success factors;91
9.3.1.3;3.3.1.3. Existing empirical findings;93
9.3.1.4;3.3.1.4. Critical assessment of success factor research;95
9.3.2;3.3.2. Success factor analysis for buyouts;99
9.3.2.1;3.3.2.1. Outline and critical assessment of relevant existing studies;100
9.3.2.2;3.3.2.2. Potential success factors;101
9.3.2.3;3.3.2.3. Existing empirical findings;112
9.3.3;3.3.3. Success factor analysis for M&A;113
9.3.3.1;3.3.3.1. Outline and critical assessment of relevant existing studies;113
9.3.3.2;3.3.3.2. Potential success factors;114
9.3.3.3;3.3.3.3. Existing empirical findings;121
9.3.4;3.3.4. Conclusion;125
10;4. Empirical study;127
10.1;4.1. Detailed outline of research approach;127
10.1.1;4.1.1. Object of research;127
10.1.2;4.1.2. Research method and research process;131
10.1.3;4.1.3. Case study research;132
10.1.3.1;4.1.3.1. Definition;132
10.1.3.2;4.1.3.2. Process of case study research;133
10.1.3.3;4.1.3.3. Quality assessment of research design;136
10.1.4;4.1.4. Questionnaire-based survey;138
10.1.4.1;4.1.4.1. Process of questionnaire-based survey;138
10.1.4.2;4.1.4.2. Quality assessment of research design;140
10.2;4.2. Research results from case studies;140
10.2.1;4.2.1. Case study reports;141
10.2.1.1;4.2.1.1. Case study A;141
10.2.1.2;4.2.1.2. Case study B;143
10.2.1.3;4.2.1.3. Case study C;145
10.2.1.4;4.2.1.4. Case study D;147
10.2.1.5;4.2.1.5. Case study E;149
10.2.1.6;4.2.1.6. Case study F;151
10.2.2;4.2.2. Cross-case study analysis;153
10.2.2.1;4.2.2.1. Key characteristics;153
10.2.2.2;4.2.2.2. Value creation;154
10.2.2.3;4.2.2.3. Success factors;155
10.3;4.3. Derivation of propositions;159
10.3.1;4.3.1. Key characteristics;159
10.3.2;4.3.2. Value creation;163
10.3.3;4.3.3. Success factors;169
10.3.3.1;4.3.3.1. Economic conditions;170
10.3.3.2;4.3.3.2. Buy-and-build process;171
10.4;4.4. Research results of questionnaire-based survey;178
10.4.1;4.4.1. Key characteristics;178
10.4.2;4.4.2. Value creation;184
10.4.3;4.4.3. Success factors;195
10.4.3.1;4.4.3.1. Statistical analysis;195
10.4.3.2;4.4.3.2. Subjective assessment;200
11;5. Conclusion and outlook;203
12;Bibliographies;208
13;Appendix;240
13.1;Appendix 1: Overview of existing research on buy-and-build strategies;241
13.2;Appendix 2: Success factors of German buyouts (JAKOBY);242
13.3;Appendix 3: Success factors of German M&A (BAMBERGER);245
13.4;Appendix 4: Propositions;247
13.5;Appendix 5: Interview guide for case studies;250
13.6;Appendix 6: Questionnaire;253
13.7;Appendix 7: Detailed results of analysis;262
to buyouts.- Theoretical background for buy-and-build strategies.- Empirical study.- Conclusion and outlook.
1. Introduction (p. 1)
1.1. Context of research topic
In recent years, the German market for whole company acquisitions by managers and/or private equity firms (so-called buyouts1) has become much more developed. The total volume and the number of completed transactions have increased significantly (see table 1). Since the number of private equity firms has also gone up (mainly due to the market entry of international players), the intensity of competition has grown contemporaneously.
As a consequence, private equity firms frequently face intense bidding competition for attractive target companies which has in turn led to higher acquisition prices. The utilisation of traditional value drivers, such as financial engineering, organic growth, or improved operating profit margin, is sometimes no longer sufficient to get both the bid accepted and to achieve attractive returns. This situation forces private equity firms to look for new value creation opportunities.
One possible solution is the adoption of a so-called buy-and-build strategy which aims to generate additional value, resulting especially from synergies through the merger of two or more companies. At first glance, buy-and-build strategies appear relatively easy to realise. However, given that mergers and acquisitions (M&,A) of socalled strategic buyers (i.e., corporations) have a disappointing track record with respect to value creation, the risk of failure in buy-and-build strategies must not be underestimated.
1.2. Research gaps and objective
The review of existing research reveals that the phenomenon of buy-and-build strategies in private equity is currently relatively undiscovered both in Germany and abroad. To the best knowledge of the author of this research project, none of the existing research contributions is based on a broad empirical study. Three areas represent the main focus of existing research: background information on the emergence of buy-and-build strategies in private equity, key characteristics of buyand- build strategies (e.g., relevant market, platform/target company, investment horizon, capital structure), and a brief outline of case examples.
Only very few researchers provide some insights into value creation, success factors, and risks. For a condensed overview of existing research on buy-and-build strategies, see appendix 1. Among the more advanced research existing, the areas of buyouts and M&,A are most closely related to the phenomenon of buy-and-build strategies (see chapters 2 and 3).
The main objective of this research project is to develop an in-depth understanding of the buy-and-build phenomenon. Therefore, the following research questions should be answered based on the results of an empirical study:
What are the key characteristics of buy-and-build strategies?
Do private equity firms on average manage to create value through adopting a buy-and-build strategy?
What are the key prerequisites for successful value creation in buy-and-build strategies?
What value drivers do private equity firms typically use to create value?
What are the key success factors for value creation in buyouts adopting a buyand- build strategy?
