Why do Financial Buyers Pay a Smaller Premium Compared to Operating Buyers? - A Study on European Buyouts
Abstract: In this thesis, we investigate if there is a difference in premium paid in buyouts by financial and operating buyers and if this potential difference can be explained by differences in post-buyout operating performance. In a large sample of 1,058 buyouts from European stock exchanges between 1997 and 2012 we find that financial buyers pay 9 percentage points less than operating buyers, after controlling for a set of target and deal characteristics. The difference in premium is higher, however not as significant, in a sub-sample of 80 Swedish buyouts. Comparing pre and post-buyout accounting data for a smaller sub-sample of 19 Swedish buyouts, we find no evidence of differences in operating performance between targets of financial and operating buyers. Hence, we are unable to explain the difference in premium with differences in post-buyout operating performance. In contrast to economic intuition, the results suggest that there is a negative relation between the premium paid and the operating performance of the target post buyout.
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