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Value Creation in Private Equity Transactions: Actions for Multiple Expansion

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198516_skora_publicacion_tesis.pdf (1.42 MB)
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2025
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Marc Goergen
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IE University
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https://hdl.handle.net/20.500.14417/3842
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Abstract
This study examines private equity TRANSACTIONS. Specifically, it focuses on the strategies, measures, policies, and initiatives (ACTIONS) initiated by private equity fund managers (GPs) to achieve MULTIPLE EXPANSION, or the sale of a PORTFOLIO COMPANY at a higher EBITDA MULTIPLE than that at which it was purchased. MULTIPLE EXPANSION is one of the three components of VALUE CREATION, defined as the difference in EQUITY VALUE between the ENTRY and EXIT of a PORTFOLIO COMPANY. The study situates this concept within the broader context of MULTIPLE-BASED VALUATION, the predominant valuation method used in the private equity industry. Changes in EQUITY VALUE between ENTRY and EXIT can be mathematically attributed to three sources: changes in EBITDA (EBITDA GROWTH), changes in the EBITDA MULTIPLE (MULTIPLE EXPANSION), and changes in NET DEBT (DELEVERAGE). While the academic literature has extensively explored EBITDA GROWTH and DELEVERAGE as outcomes of ACTIONS initiated by GPs, little is known about deliberate ACTIONS aimed at securing MULTIPLE EXPANSION. This study aims to fill this gap by demonstrating the relevance of MULTIPLE EXPANSION as a significant aspect and inherent value-altering factor of VALUE CREATION actively targeted by GPs. Using a proprietary deal-level dataset, several statistical tests and regression analyses are conducted to find evidence to support the hypotheses that each of LATE-STAGE EXPANSION CAPEX, LATE-STAGE R&D, STRATEGIC REFOCUS, and ADD-ON acquisitions have a significant positive effect on MULTIPLE EXPANSION. The evidence supports both LATE-STAGE EXPANSION CAPEX and ADD-ON acquisitions. For LATE-STAGE R&D and STRATEGIC REFOCUS, the study finds a significant positive effect on MULTIPLE EXPANSION, if the interaction term of both variables is examined.
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Attribution-NonCommercial 4.0 International
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IE Business School
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Skora, K. M. (2025) Value Creation in Private Equity Transactions: Actions for Multiple Expansion. (Tesis doctoral).
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Doctoral theses