Fare Thee Well? An Analysis of Buyout Funds' Exit Strategies

Abstract

This paper analyzes exit strategies of buyout funds in their portfolio companies following Initial Public Offerings. We use a data set of 222 buyout-backed IPOs in the United States between 1999 and 2008 including hand-collected data about each exit process to draw up a detailed road map of buyout investors’ divestment processes. Using this data, we document timing and aggressiveness of the exit strategies, and analyze to which degree a multitude of possible determinants influence the choice for a given exit strategy. Our results show that buyout funds stay invested in their portfolio companies for a substantial period of time after the IPO, and that the choice for a given exit strategy depends not only on characteristics of each respective portfolio company, but also on the financial success of the deal from the perspective of the buyout investor.