Why do public firms go private in the UK? The impact of private equity investors, incentive realignment and undervaluation

Journal of Corporate Finance

Volumn 13, Issue 4, 2007, Pages 591-628

  Renneboog, Luc ^a,b   Simons, Tomas ^a   Wright, Mike ^c,d  

^a TILBURG UNIVERSITY   (Netherlands)

^b European Corporate Governance Institute   (Belgium)

^c Center for Management Buy out Research   (United Kingdom)

^d ERASMUS UNIVERSITY ROTTERDAM   (Netherlands)

Author keywords

Delisting; Going private; IBO; LBO; Leveraged buyouts; Management buyins; Management buyouts; MBI; MBO; Private equity; Public to private

Indexed keywords

EID: 34548061297     PISSN: 09291199     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jcorpfin.2007.04.005     Document Type: Article

References (86)

1. Aghion P., and Bolton P. An incomplete contract approach to financial contracting. Review of Economic Studies 59 (1992) 473-494
2. Amihud Y. Leveraged Management Buy-Outs (1989), Dow-Jones Irwin, New York
3. Ashurst, Morris, and Crisp. Public-to-private takeovers in Germany. Ashurst, Morris, Crisp Investment Banking Briefing (2002)
4. Asquith P., and Wizman T. Event risk, covenants, and bondholder returns in leveraged buyouts. Journal of Financial Economics 27 (1990) 195-213
5. Benoit B. Companies and Finance: UK: professional expenses prove a deterrent to maintaining stock market exposure: but costs of public-to-private deals can also be considerable. Bertrand Benoit reports. The Financial Times of August 31, 1999 (1999) 18
6. Campbell J., Lo A., and MacKinlay A.C. Event-study analysis. Chapter 4 in The Econometrics of Financial Markets (1997), Princeton University Press
7. CMBOR. Public-to-Private Buy-Outs in the UK and Continental Europe, Section 3 in UK Quarterly Review (2002), Centre for Management Buy-out Research, University of Nottingham Summer
8. CMBOR. Public-to-Private Buy-Outs in the UK and Continental Europe, Section 3 in UK Quarterly Review (2005), Centre for Management Buy-out Research, University of Nottingham Winter 2004/5
9. CMBOR. European Management Buy-Outs (2006), Centre for Management Buy-out Research, University of Nottingham
10. Cook D.O., Easterwood J.C., and Martin J.D. Bondholder wealth effects of management buyouts. Financial Management 21 (1992) 102-113
11. Corrado C.J. A nonparametric test for abnormal security-price performance in event studies. Journal of Financial Economics 23 (1989) 385-395
12. Cotter J., and Peck S. The structure of debt and active equity investors: the case of the buyout specialist. Journal of Financial Economics 59 (2001) 101-147
13. Crespi R., and Renneboog L. Coalition formation and shareholder monitoring in the UK. Working Paper CentER (2002), Tilburg University
14. Cowan A.R. Nonparametric event study tests. Review of Quantitative Finance and Accounting 2 (1992) 343-358
15. Davis S., and Day R. Public-to-private deals: reducing the risk and removing the uncertainty. UK Venture Capital Journal 5 (1998) 1-6
16. DeAngelo L. Accounting numbers as market valuation substitutes: a study of management buyouts of public stockholders. The Accounting Review 61 (1986) 400-420
17. DeAngelo H., DeAngelo L., and Rice E.M. Going private: minority freezeouts and stockholder wealth. Journal of Law and Economics 27 (1984) 367-401
18. Dicker A. Tax issues. In: De Caires B. (Ed). Corporate Restructuring (1990), Euromoney Publications, London
19. Dimson E. Risk measurement when shares are subject to infrequent trading. Journal of Financial Economics 7 (1979) 197-226
20. Dyck A., and Zingales L. The private benefits of control: an international comparison. Journal of Finance 59 (2004) 537-600
21. Easterwood J., Singer R., Seth A., and Lang D. Controlling the conflict of interest in management buyouts. Review of Economics and Statistics 76 (1994) 512-522
22. Frankfurter G.M., and Gunay E. Management buy-outs: the sources and sharing of wealth between insiders and outside shareholders. Quarterly Review of Economics and Finance 32 (1992) 82-95
23. Franks J., and Nyborg K. Control rights, debt structure and the loss of private benefits: the case of the U.K. insolvency code. Review of Financial Studies 9 (1996) 1165-1210
24. Franks J., Mayer C., and Renneboog L. Who disciplines management of poorly performing companies?. Journal of Financial Intermediation 10 (2001) 209-248
25. Goergen M., and Renneboog L. Shareholder wealth effects of European domestic and cross-border takeover bids. European Financial Management Journal 10 (2004) 9-45
26. Goh J., Gombola M., Liu F.Y., and Chou D.W. Going-private restructuring and earnings expectations: a test of the release of favorable information for target firms and industry rivals. Working paper (2002)
27. Goldstein D. Hostile takeovers as corporate governance? Evidence from the 1980s. Review of Political Economy 12 (2000) 381-400
28. Grossman S.J., and Hart O.D. Take-over bids, the free-rider problem and the theory of the corporation. Bell Journal of Economics 11 (1980) 42-64
29. Halpern P., Kieschnick R., and Rotenberg W. On the heterogeneity of leveraged going private transactions. Review of Financial Studies 12 (1999) 281-309
30. Harlow W.V., and Howe J.S. Leveraged buyouts and insider nontrading. Financial Management 22 (1993) 109-118
31. Harris R., Siegel D., and Wright M. Assessing the impact of management buyouts on economic efficiency: plant-level evidence from the United Kingdom. Review of Economics and Statistics 87 (2005) 148-153
32. Holderness C.G., and Sheehan D. The role of majority shareholders in publicly held corporations. Journal of Financial Economics 20 (1988) 317-346
33. Holmstrom B., and Kaplan S.N. Corporate governance and merger activity in the U.S.: making sense of the '80s and '90s. Journal of Economic Perspectives 15 (2001) 121-144
34. Hubbard G., and Palia D. Benefits of control, managerial ownership, and the stock returns of acquiring firms. RAND Journal of Economics 26 (1995) 782-794
35. Jensen M.C. Agency costs of free cash flow, corporate finance and takeovers. American Economic Review 76 (1986) 323-329
36. Jensen M.C. The eclipse of the public corporation. Harvard Business Review 67 (1989) 61-74
37. Jensen M.C. Corporate control and the politics of finance. Journal of Applied Corporate Finance 4 (1991) 13-33
38. Jensen M.C. The modern industrial revolution: exit and the failure of internal control systems. Journal of Finance 48 (1993) 831-880
39. Jensen M.C., and Meckling W. Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics 3 (1976) 305-360
40. Jensen M.C., and Ruback R.S. The market for corporate control; the scientific evidence. Journal of Financial Economics 11 (1983) 5-50
41. Kaestner R., and Liu F.Y. Going private restructuring: the role of insider trading. Journal of Business Finance and Accounting 23 (1996) 779-806
42. Kaplan S.N. The effects of management buyouts on operating performance and value. Journal of Financial Economics 24 (1989) 217-254
43. Kaplan S.N. Management buyouts: evidence on taxes as a source of value. Journal of Finance 44 (1989) 611-632
44. Kaplan S.N., and Stein J. The evolution of buy-out pricing and financial structure in the 1980s. Quarterly Journal of Economics 108 (1993) 313-359
45. Kaplan S.N., and Strömberg. Venture capitalists as principals: contracting, screening and monitoring. American Economic Review 91 (2001) 426-430
46. Kieschnick R.L. Free cash flow and stockholder gains in going private transactions revisited. Journal of Business Finance and Accounting 25 (1998) 187-202
47. Kothari S.P., and Warner J.B. Measuring long-horizon security performance. Journal of Financial Economics 43 (1997) 301-339
48. Kuhn Capital. Going-Private Equity (2003), Kuhn Capital Publication
49. Lee D.S. Management buyout proposals and inside information. Journal of Finance 47 (1992) 1061-1079
50. Lee C.I., Rosenstein S., Rangan N., and Davidson III W.N. Board composition and shareholder wealth: the case of management buyouts. Financial Management 21 (1992) 58-72
51. Lehn K., and Poulsen A. Free cash flow and stockholder gains in going private transactions. Journal of Finance 44 (1989) 771-788
52. Lowenstein L. Management buyouts. Columbia Law Review 85 (1985) 730-784
53. Marais L., Schipper K., and Smith A. Wealth effects of going private for senior securities. Journal of Financial Economics 23 (1989) 155-191
54. Martynova M., and Renneboog L. Takeover waves: triggers, performance and motives. Working paper European Corporate Governance Institute and Tilburg University (2005)
55. Martynova M., and Renneboog L. Mergers and Acquisitions in Europe. Working paper European Corporate Governance Institute and Tilburg University (2006)
56. Miller G.P. Takeovers: English and American. European Financial Management 6 (2000) 533-541
57. Mitchell M., and Mulherin H. The impact of industry shocks on takeover and restructuring activity. Journal of Financial (1996) 193-229
58. Morck R., Shleifer A., and Vishny R.W. Management ownership and market valuation; an empirical analysis. Journal of Financial Economics 20 (1988) 293-315
59. Murphy K.J. Corporate performance and managerial remuneration: an empirical analysis. Journal of Accounting and Economics 7 (1985) 11-42
60. Opler T., and Titman S. The determinants of leveraged buyout activity: free cash flow versus financial distress costs. Journal of Finance 48 (1993) 1985-1999
61. Paul A. United Kingdom. The Mergers and Acquisitions 1994 Yearbook (1994)
62. Perry S., and Williams T. Earnings management preceding management buyout offers. Journal of Accounting and Economics 18 (1994) 152-179
63. Renneboog L., and Simons T. Public to private transactions: LBOs, MBOs, MBIs and IBOs. Working paper European Corporate Governance Institute and Tilburg University (2005)
64. Renneboog L., and Szilagyi P. How do mergers and acquisitions affect bondholders in Europe? Evidence on the impact and spillover of governance and legal standards. Working Paper European Corporate Governance Institute (2006)
65. Schadler F.P., and Karns J.E. The unethical exploitation of shareholders in management buyout transactions. Journal of Business Ethics 9 (1990) 595-602
66. Shleifer A., and Summers C.H. Breach of trust in hostile takeovers, chapter 2. In: Auerbach A.J. (Ed). Corporate Takeovers: Causes and Consequences (1988), University of Chicago Press, Chicago
67. Shleifer A., and Vishny R.W. The takeover wave of the 1980s. Journal of Applied Corporate Finance 4 (1991) 49-56
68. Singh H. Management buyouts: distinguishing characteristics and operating changes prior to public offering. Strategic Management Journal 11 (1990) 111-129
69. Slovin M.B., Sushka M.E., and Bendeck Y.M. The intra-industry effects of going-private proposals. Journal of Finance 46 (1991) 1537-1550
70. Smith A. The Wealth of Nations. ed. 1976 (1776), Penguin Classics, Glasgow
71. Smith A. Corporate ownership structure and performance: the case of management buy-outs. Journal of Financial Economics 27 (1990) 143-164
72. Strong N. Modelling abnormal returns: a review article. Journal of Business Finance and Accounting 19 (1992) 533-553
73. Stulz R. Managerial control of voting rights, financing policies, and the market for corporate control. Journal of Financial Economics 20 (1988) 25-54
74. Toms S., and Wright M. Divergence and convergence within Anglo-American corporate governance systems: evidence from the US and UK 1950-2000. Business History 47 (2005) 267-295
75. Torabzadeh K.M., and Bertin W.J. Leveraged buyouts and shareholder wealth. Journal of Financial Research 10 (1987) 313-319
76. Travlos N.G., and Cornett M.M. Going private buyouts and determinants of shareholders' returns. Journal of Accounting, Auditing & Finance 8 (1993) 1-25
77. Van de Gucht L.M., and Moore W.T. Predicting the duration and reversal probability of leveraged buyouts. Journal of Empirical Finance 5 (1998) 299-315
78. Warga A., and Welch I. Bondholder losses in leveraged buyouts. The Review of Financial Studies 6 (1993) 959-982
79. Weir C., Laing D., and Wright M. Incentive effects, monitoring mechanisms and the threat from the market for corporate control: an analysis of the factors affecting public to private transactions in the UK. Journal of Business Finance and Accounting 32 (2005) 909-944
80. Weir C., Laing D., and Wright M. Undervaluation, private information, agency costs and the decision to go private. Applied Financial Economics 15 (2005) 947-961
81. Weston J.F., Chung K.S., and Siu J.A. Takeovers, Restructuring and Corporate Governance. second edition (1998), Prentice-Hall, New York
82. White H. A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica 48 (1980) 817-838
83. Wright M., Thompson S., Chiplin B., and Robbie K. Buy-Ins and Buy-Outs: New Strategies in Corporate Management (1991), Graham & Trotman Ltd., London
84. Wright M., Chiplin B., Robbie K., and Albrighton M. The development of an organizational innovation: management buy-outs in the UK. Business History 42 (2000) 137-184
85. Wright M., Hoskisson R., Busenitz L., and Dial J. Entrepreneurial growth through privatization: the upside of management buyouts. Academy of Management Review 25 (2000) 591-601
86. Wright M., Renneboog L., Simons T., and Scholes L. Leveraged buy-outs in the UK and Europe: retrospect and prospect. Journal of Applied Corporate Finance 18 (2006) 38-55