Klier Managing Diversified Portfolios

What Multi-Business Firms Can Learn from Private Equity
1. Auflage 2009
ISBN: 978-3-7908-2173-4
Verlag: Physica-Verlag HD
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 295 Seiten

Reihe: Contributions to Management Science

There has been a long tradition of research on the relation between diversification and performance of public corporations in the strategy and finance fields. As for private equity portfolios, research on this matter is rather scarce. From a theoretical as well as from a practical perspective, however, it is interesting to know more about the relation between private equity portfolio diversification and performance, how private equity firms manage their portfolios, and what public companies can learn from private equity firms. These are the research questions which are addressed in Daniel Klier's research. In order to answer these questions, the author uses a two-tier research design. As a first step, he compares the diversification-performance link of public corporations and private equity firms. With respect to the private equity sample and the ope- tionalization of the relevant variables, the study is highly innovative in terms of generating the PE sample from databases like Preqin and Dealogic, constructing a diversification measure from transaction data, and developing comparable perfo- ance measures for private equity firms as well as traditional multi-business firms. As the second step, which is exploratory in nature, the author explores m- agement models of PE firms. The sample of 20 US and Europe-based private equity firms is unique and of high quality, because the author succeeded in getting in-depth interviews with top decision makers of PE firms. The exploratory study extracts three clusters of management models that PE firms are using, and their relation to performance.

Autoren/Hrsg.

Klier, Daniel O.

Inhaltsverzeichnis

1;Foreword;5
2;Acknowledgements;6
3;Contents;8
4;Abbreviations;12
5;List of Figures;14
6;List of Tables;16
7;1 Introduction;18
7.1;1.1 Research Motivation;19
7.1.1;1.1.1 Practical Relevance;19
7.1.2;1.1.2 Theoretical Relevance;20
7.2;1.2 Research Objective;22
7.2.1;1.2.1 Diversification and Performance;22
7.2.2;1.2.2 Managing Diversified Portfolios;23
7.3;1.3 Structure of Dissertation;24
8;2 Diversification in Corporations;26
8.1;2.1 Definition of Diversification;26
8.1.1;2.1.1 Diversification as Process;27
8.1.2;2.1.2 Diversification as Status;27
8.2;2.2 Overview of Academic Research on Corporate Diversification;28
8.2.1;2.2.1 General Overview of Academic Research;29
8.2.2;2.2.2 Motives for Diversification;31
8.2.3;2.2.3 Entry into New Businesses;36
8.2.4;2.2.4 Structure of Multi-Business Firms;39
8.2.5;2.2.5 Management of Multi-Business Firms;41
8.2.6;2.2.6 Financial Implications of Diversification;44
8.3;2.3 Diversification and Performance;45
8.3.1;2.3.1 Measures of Diversification;46
8.3.2;2.3.2 Influence of Diversification on Valuation;49
8.3.3;2.3.3 Influence of Diversification on Financial Performance;52
8.4;2.4 Managing Diversified Portfolios;55
8.4.1;2.4.1 Value of the Parent Company;56
8.4.2;2.4.2 Governance Model in Multi-Business Firms;58
8.4.3;2.4.3 Availability of Central Functions and Resources;62
8.4.4;2.4.4 Leverage of Resources and Competences across Businesses;64
8.4.5;2.4.5 Portfolio Management in Multi-Business Firms;66
9;3 Introduction to the Private Equity Industry and the Role of Diversification;70
9.1;3.1 Overview of the Private Equity Industry;70
9.1.1;3.1.1 Definition of Private Equity;71
9.1.2;3.1.2 Development of the Industry;72
9.1.3;3.1.3 Structure of the Industry;76
9.2;3.2 Profile of the Leveraged Buyout Segment;82
9.2.1;3.2.1 Key Characteristics of Leveraged Buyouts;82
9.2.2;3.2.2 Leveraged Buyout Landscape;88
9.2.3;3.2.3 Value Creation Techniques;89
9.2.4;3.2.4 Performance of Leveraged Buyout Investments;97
9.2.5;3.2.5 Industry Trends and Future;101
9.3;3.3 Diversification in Private Equity;103
9.3.1;3.3.1 Diversification and Performance;104
9.3.2;3.3.2 Managing Diversified Portfolios;105
9.4;3.4 Comparison of Private Equity Firms and Diversified Corporations;108
9.4.1;3.4.1 Acquisition and Diversification Strategy;109
9.4.2;3.4.2 Portfolio and Divestiture Strategy;109
9.4.3;3.4.3 Role of the Parent;110
9.4.4;3.4.4 Role of the Operating Unit;111
10;4 General Research Design;113
10.1;4.1 Starting Position in Academic Literature: a Synthesis;113
10.1.1;4.1.1 Diversification Research in Corporations;114
10.1.2;4.1.2 Diversification Research in Private Equity;115
10.2;4.2 Direction of Research;116
10.2.1;4.2.1 Research Direction “Diversification and Performance”;116
10.2.2;4.2.2 Research Direction “Managing Diversified Portfolios”;117
10.3;4.3 Empirical Research Design;119
10.3.1;4.3.1 Research Design “Diversification and Performance”;119
10.3.2;4.3.2 Research Design “Managing Diversified Portfolios”;122
11;5 Empirical Part I: Diversification and Performance;127
11.1;5.1 Hypotheses;127
11.1.1;5.1.1 Performance: Private Equity vs. Public Corporations;128
11.1.2;5.1.2 Diversification and Performance in Private Equity;129
11.1.3;5.1.3 Diversification and Performance: Private Equity vs. Public Corporations;130
11.2;5.2 Methodology;131
11.2.1;5.2.1 Data Sample;131
11.2.2;5.2.2 Diversification Measures;138
11.2.3;5.2.3 Performance Measures;142
11.3;5.3 Empirical Results;145
11.3.1;5.3.1 Performance: Private Equity vs. Public Corporations;146
11.3.2;5.3.2 Diversification and Performance in Private Equity;151
11.3.3;5.3.3 Diversification and Performance: Private Equity vs. Public Corporations;167
11.4;5.4 Discussion of Results;178
11.4.1;5.4.1 Diversification in Private Equity;179
11.4.2;5.4.2 Performance Drivers in Private Equity;181
11.4.3;5.4.3 Comparison Private Equity vs. Public Equity;186
11.4.4;5.4.4 Limitations of Research;188
12;6 Empirical Part II: Managing Diversified Portfolios;190
12.1;6.1 Exploratory Framework;191
12.1.1;6.1.1 General Structure;191
12.1.2;6.1.2 Influencing Factors;192
12.1.3;6.1.3 Firm Conduct;194
12.1.4;6.1.4 Private Equity Performance;196
12.1.5;6.1.5 Feedback Mechanisms;196
12.2;6.2 Methodology;197
12.2.1;6.2.1 Sample for Exploratory Research;197
12.2.2;6.2.2 Sources of Information;200
12.2.3;6.2.3 Structure of Interview;202
12.2.4;6.2.4 Design for Data Analysis;203
12.3;6.3 Empirical Results;203
12.3.1;6.3.1 Management Models in Private Equity;204
12.3.2;6.3.2 Characteristics of Opportunistic Financial Investors;206
12.3.3;6.3.3 Characteristics of Interventionist Managers;211
12.3.4;6.3.4 Hybrid Management Models;218
12.3.5;6.3.5 Trends in the Private Equity Management Model;219
12.4;6.4 Discussion of Results;223
12.4.1;6.4.1 Comparison of Management Models and Impact on Performance;224
12.4.2;6.4.2 Key Success Factors of Private Equity Management Model;232
12.4.3;6.4.3 Private Equity as Role Model for Multi-Business Firms;238
12.4.4;6.4.4 Limitations of Research;245
13;7 Conclusion and Outlook;247
13.1;7.1 Implications for Private Equity Managers;248
13.1.1;7.1.1 Portfolio Strategy;248
13.1.2;7.1.2 Management Model;248
13.2;7.2 Implications for Investors;250
13.3;7.3 Implications for Corporate Managers;251
13.3.1;7.3.1 Portfolio Strategy;251
13.3.2;7.3.2 Management Model;252
13.4;7.4 Outlook for Academic Research;253
13.4.1;7.4.1 Research in Private Equity;254
13.4.2;7.4.2 Research in Corporate Management;255
14;Appendices;256
14.1;List of SIC Codes;256
14.2;Profiles of Private Equity Firms Included in Exploratory Research;271
14.3;(1) APAX Partners;271
14.4;(2) Apollo Management;271
14.5;(3) Bain Capital;272
14.6;(4) BC Partners;272
14.7;(5) The Blackstone Group;272
14.8;(6) Candover Partners;273
14.9;(7) The Carlyle Group;273
14.10;(8) Catterton Partners;273
14.11;(9) Cinven;274
14.12;(10) Francisco Partners;274
14.13;(11) Goldman Sachs Capital Partners;274
14.14;(12) HarbourVest Partners;275
14.15;(13) Hellman & Friedman;275
14.16;(14) Industri Kapital;276
14.17;(15) KohlbergKravisRoberts & Co;276
14.18;(16) Montagu Private Equity;276
14.19;(17) Permira;277
14.20;(18) Terra Firma Capital Partners;277
14.21;(19) Texas Pacific Group;277
14.22;(20) WindPoint Partners;278
15;Interview Guide ‘Diversification in Private Equity’;279
15.1;Firm Characteristics and Portfolio Strategy;280
15.2;Firm Characteristics;280
15.3;Investment Portfolio;280
15.4;Role of the Parent;280
15.5;Management Approach to Diversified Portfolios;281
15.6;Availability of Center Functions and Resources;281
15.7;Leverage of Competences and Resources;282
15.8;Governance Model;282
15.9;Portfolio Management;283
15.10;Outlook on Future Industry Practices;283
16;Bibliography;285
17;About the Author;307