Private Equity, Buy‐Outs and Insolvency Risk

42 Pages Posted: 15 Nov 2013

See all articles by Nick Wilson

Nick Wilson

University of Leeds - Credit Management Research Centre; Leeds University Business School

Mike Wright

Imperial College London

Multiple version iconThere are 2 versions of this paper

Date Written: September/October 2013

Abstract

Private equity restructuring using debt has been criticized for increasing financial distress and bankruptcy especially following the financial crisis. We build a unique dataset comprising the population of over 9 million firm‐year observations and 153,000 insolvencies during the period 1995–2010. We compare the insolvency hazard of the spectrum of buy‐out types within the corporate population over time and investigate the risk profile of the companies pre‐buy‐out. Controlling for size, age, sector and macro‐economic conditions, private‐equity backed buy‐outs are no more prone to insolvency than non‐buy‐outs or other types of management buy‐ins. Moreover, leverage is not the characteristic that distinguishes failed buy‐outs from those surviving.

Keywords: private equity, management buy‐outs, insolvency, bankruptcy

Suggested Citation

Wilson, Nicholas and Wright, Mike, Private Equity, Buy‐Outs and Insolvency Risk (September/October 2013). Journal of Business Finance & Accounting, Vol. 40, Issue 7-8, pp. 949-990, 2013, Available at SSRN: https://ssrn.com/abstract=2354739 or http://dx.doi.org/10.1111/jbfa.12042

Nicholas Wilson (Contact Author)

University of Leeds - Credit Management Research Centre ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

Leeds University Business School ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

Mike Wright

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

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