artikelen cf

7/25/2019 Artikelen CF

1/8

Why Does IPO Volume Fluctuate So Much? (Lowry, 2003)

IPO olume !uctuates su"sta#t$ally oer t$me% &h$s 'a'er com'ares theete#t to wh$ch the areate ca'$tal *ema#*s o+ 'r$ate rms, thea*erse-select$o# costs o+ $ssu$# e.u$ty, a#* the leel o+ $#estor

o't$m$sm ca# e'la$# these !uctuat$o#s% /m'$r$cal tests $#clu*e "othareate a#* $#*ustry-leel t$me-ser$es reress$o#s us$# 'ro$es +or thea"oe +actors a#* a# a#alys$s o+ the relat$o# "etwee# 'ost-IPO stocretur#s a#* IPO olume% 1esults $#*$cate that rms *ema#*s +or ca'$tala#* $#estor se#t$me#t are $m'orta#t *eterm$#a#ts o+ IPO olume, $# "othstat$st$cal a#* eco#om$c terms% *erse-select$o# costs are alsostat$st$cally s$#$ca#t, "ut the$r eco#om$c e4ect a''ears small%

I# summary, results $#*$cate that cha#es $# rms *ema#*s +or ca'$tala#* cha#es $# the leel o+ $#estor o't$m$sm e'la$# a su"sta#t$al 'ort$o#o+ the ar$at$o# $# IPO olume% *erse select$o# costs are mar$#allys$#$ca#t a#* a''ear to "e o+ seco#*ary $m'orta#ce% 5ota"ly, the 'r$orl$terature has +ocuse* o# o#ly o#e 'ote#t$al *eterm$#a#t o+ IPO olume,$#estor se#t$me#t% Wh$le se#t$me#t *oes a''ear to a4ect the t$m$# o+IPOs, e$*e#ce $#*$cates that $t $s #ot the o#ly relea#t +actor% Des'$te thelare l$terature o# IPOs, we st$ll hae relat$ely l$ttle u#*ersta#*$# o+ whythe #um"er o+ IPOs !uctuates so su"sta#t$ally oer t$me% &h$s 'a'er seesto she* l$ht o# th$s $ssue% S'ec$cally, I $#est$ate the +actors that lea*so ma#y com'a#$es to hae IPOs *ur$# some 'er$o*s, ersus so +ew*ur$# other t$mes% 1esults $#*$cate that com'a#$es *ema#* +or ca'$tala#* the leel o+ $#estor se#t$me#t e'la$# a s$#$ca#t amou#t o+ the

ar$at$o# $# IPO olume% I# eco#om$c terms, a# $#crease o+ 23,000 #ewcor'orat$o#s a#* a 267 *ecrease $# +uture maret retur#s ($%e%, a o#esta#*ar* *e$at$o# cha#e $# each ar$a"le) are each assoc$ate* w$tha"out 86 more IPOs $# 9:;6, a#* a *ecrease o+ 8%: 'erce#tae 'o$#ts $#the close*-e#* +u#* *$scou#t (o#e sta#*ar* *e$at$o#) $s assoc$ate* w$tha''ro$mately 969 more IPOs $# 9:;6% *erse select$o# costs are alsostat$st$cally s$#$ca#t, "ut they are #ot s$#$ca#t $# eco#om$c terms,suest$# that they are o+ seco#*ary $m'orta#ce%I# summary, the results suest that IPO olume $s 'os$t$ely relate* tocom'a#$es *ema#*s +or ca'$tal a#* the leel o+ $#estor se#t$me#t% F$rmsare also mar$#ally more l$ely to hae a# IPO whe# a*erse select$o#

costs are lower% W$th res'ect to all o+ these +actors, *y#am$cs at "oth theeco#omy-w$*e leel a#* at the $#*ustry leel s$#$ca#tly a4ect rms*ec$s$o#s%Local u#*erwr$ter ol$o'ol$es a#* IPO u#*er'r$c$# (e* com'et$t$o#% /e#thouh a lare #um"er o+ $#estme#t "a#s com'ete +or IPOs, $+ $ssuerscare a"out #o#-'r$ce *$me#s$o#s o+ u#*erwr$t$#, the# the $#*ustrystructure $s "est character$>e* as a ser$es o+ local ol$o'ol$es% We test ourmo*el $m'l$cat$o#s o# all-star a#alyst coerae, $#*ustry e'ert$se, a#*other #o#-'r$ce *$me#s$o#s% Furthermore, we 'os$t that e#ture ca'$tal$sts


2/8

(Vs) are es'ec$ally +ocuse* o# all-star a#alyst coerae, a#* *eelo' thea#alyst lust theory o+ the u#*er'r$c$# o+ V-"ace* IPOs% o#s$ste#t w$thth$s theory, we #* that V-"ace* IPOs are much more u#*er'r$ce* whe#they hae coerae +rom a# all-star a#alyst%

&he mo*el also e#erates a #ew theory o+ the u#*er'r$c$# o+ e#tureca'$tal-"ace* IPOs@ the a#alyst lust theory% We 'os$t that e#tureca'$tal$sts (Vs) are rat$o#ally +ocuse* o# the maret 'r$ce o# the *aywhe# shares $# the com'a#y are *$str$"ute* to l$m$te* 'art#ers, wh$ch $sty'$cally s$ mo#ths to 9 year a+ter the IPO% We assume that th$s maret'r$ce $s "ooste* "y coerae +rom $#!ue#t$al a#alysts, wh$ch we measure"y us$# the Aall-starB *es$#at$o# $# the Octo"er $ssue o+ I#st$tut$o#alI#estor maa>$#e% Cecause o+ the$r co#cer# w$th th$s 'r$ce, Vs hae areater lust +or all-star a#alyst coerae that $s "u#*le* w$th IPOu#*erwr$t$#, result$# $# reater u#*er'r$c$# +or V-"ace* IPOs w$th all-star a#alyst coerae%

/m'$r$cally, we #* that $ssuers us$# a "ooru##er that "u#*lesu#*erwr$t$# w$th $#!ue#t$al a#alyst coerae are su"ect to :7 moreu#*er'r$c$# *ur$# 9::3E200;% We also #* that the $#creme#talu#*er'r$c$# assoc$ate* w$th all-star a#alyst coerae $s h$her +or $ssuersthat 'erce$e all-star a#alyst coerae as more alua"le a#* *ur$#'er$o*s whe# all-star a#alyst coerae $s more $m'orta#t% Moreoer, we#* that the e4ect o+ all-star a#alyst coerae o# u#*er'r$c$# $s lower $#'er$o*s whe# the IPO olume $# a# $#*ustry $s low%

s$# e#ture ca'$tal-"ac$# as a 'roy +or a reater w$ll$##ess to 'ay+or coerae +rom a# $#!ue#t$al a#alyst, we #* that V-"ace* $ssuershae 207 more u#*er'r$c$# (e%%, 3;7 rather tha# 9;7) whe# they haeall-star coerae tha# whe# they *o #ot, hol*$# other th$#s co#sta#t%Moreoer, whe# the relat$o# "etwee# V-"ac$# a#* all-star a#alystcoerae $s co#trolle* +or, the e4ect o+ V-"ac$# $tsel+ o# u#*er'r$c$# $sre*uce* "y more tha# 607, suest$# that most o+ the e4ect o+ V-"ac$# o# u#*er'r$c$# $s *ue to the reater +ocus "y e#ture ca'$tal$stso# all-star a#alyst coerae% Sur'r$s$#ly, there $s #o rel$a"le relat$o#"etwee# all-star a#alyst coerae a#* u#*er'r$c$# +or #o#-V-"ace*IPOs

Where hae al the IPOs Go#e ? (Gao H 1$tter)

Dur$# 9:;0E2000, a# aerae o+ 390 com'a#$es 'er year we#t 'u"l$c $#the #$te* States% S$#ce 2000, the aerae has "ee# o#ly :: $#$t$al 'u"l$co4er$#s (IPOs) 'er year, w$th the *ro' es'ec$ally 'rec$'$tous amo# smallrms% Ma#y hae "lame* the Sar"a#es-Oley ct o+ 2002 a#* the 2003Glo"al Settleme#ts e4ects o# a#alyst coerae +or the *ecl$#e $# IPOact$$ty% We #* ery l$ttle su''ort +or the co#e#t$o#al w$s*om, a#* weo4er a# alter#at$e e'la#at$o#% Our eco#om$es o+ sco'e hy'othes$s 'os$tsthat the a*a#taes o+ sell$# out to a larer ora#$>at$o#, wh$ch ca#s'ee* a 'ro*uct to maret a#* real$>e eco#om$es o+ sco'e, hae $#crease*relat$e to the "e#ets o+ o'erat$# as a# $#*e'e#*e#t rm%


3/8

I# th$s 'a'er, we $#tro*uce a #ew e'la#at$o# +or the 'rolo#e* low leelo+ %S% IPO olume, wh$ch we term the economies of scope hypothesis% We'os$t that there $s a# o#o$# cha#e $# the eco#omy that has re*uce* the'rota"$l$ty o+ small com'a#$es, whether 'u"l$c or 'r$ate% We co#te#*that ma#y small rms ca# create reater o'erat$# 'rots "y sell$# out $#

a tra*e sale ("e$# ac.u$re* "y a rm $# the same or a relate* $#*ustry)rather tha# o'erat$# as a# $#*e'e#*e#t rm a#* rely$# o# ora#$c ($%e%,$#ter#al) rowth% /ar#$#s w$ll "e h$her as 'art o+ a larer ora#$>at$o#that ca# real$>e eco#om$es o+ sco'e a#* "r$# #ew tech#oloy to maret+aster%2 We 'os$t that the $m'orta#ce o+ ett$# "$ +ast has $#crease* oert$me *ue to a# $#crease $# the s'ee* o+ tech#olo$cal $##oat$o# $# ma#y$#*ustr$es, w$th 'rota"le rowth o''ortu#$t$es 'ote#t$ally lost $+ they are#ot .u$cly se$>e*%

&o the "est o+ our #owle*e, our eco#om$es o+ sco'e hy'othes$s o4ers acom'letely #ew e'la#at$o# +or the *ro' $# %S% IPO act$$ty a+ter 2000%lthouh our e$*e#ce su''ort$# the hy'othes$s $s larely $#*$rect, ourhy'othes$s $s co#s$ste#t w$th seeral 'atter#s +or wh$ch there has "ee# #oco#s$ste#t e'la#at$o#@ a *ecl$#e $# small-rm 'rota"$l$ty start$# $# theearly 9:;0s, a# $#crease $# the 'ro"a"$l$ty o+ "e$# $#ole* $# merer a#*ac.u$s$t$o# (MH) act$$ty "e$#- #$# $# the m$*-9::0s, a *ecrease $# the'ro"a"$l$ty o+ a e#ture ca'$tal-"ace* (V-"ace*) com'a#y e$t$# $aa# IPO start$# $# the early 9::0s, a#* a lower #um"er o+ IPOs relat$e towhat woul* "e 're*$cte* o# the "as$s o+ 'u"l$c maret aluat$o# rat$osstart$# $# 9::8% Furthermore, we are u#aware o+ a#y 'atter#s that are$#co#s$ste#t w$th our e'la#at$o#% I+ our eco#om$es o+ sco'e e'la#at$o# $s

correct, reulatory re+orms a$me* at restor$# the IPO ecosystem w$ll haeo#ly a mo*est a"$l$ty to a4ect IPO olume, a#* a "ull maret w$ll #ot seto4 a wae o+ small-com'a#y IPOs%Stoc Maret Dr$e# c.u$s$t$o#s, (Shle$+er, 2002)

We 'rese#t a mo*el o+ merers a#* ac.u$s$t$o#s "ase* o# stoc maretm$s aluat$o#s o+ the com"$#$# rms% &he ey $#re*$e#ts o+ the mo*elare the relat$e aluat$o#s o+ the mer$# rms a#* the marets'erce't$o# o+ the sy#er$es +rom the com"$#at$o#% &he mo*el e'la$#s whoac.u$res whom, the cho$ce o+ the me*$um o+ 'ayme#t, the aluat$o#co#se.ue#ces o+ merers, a#* merer waes% &he mo*el $s co#s$ste#t

w$th aa$la"le em'$r$cal #*$#s a"out character$st$cs a#* retur#s o+mer$# rms, a#* y$el*s #ew 're*$ct$o#s as well%

We 'ro'ose a theory o+ ac.u$s$t$o#s relate* to the #eoclass$cal theory, "utalso a"le to accommo*ate the a**$t$o#al e$*e#ce% I# th$s theory,tra#sact$o#s are *r$e# "y stoc maret aluat$o#s o+ the mer$# rms%&he +u#*ame#tal assum't$o# o+ the mo*el $s that #a#c$al marets are$#ec$e#t, so some rms are alue* $#correctly% I# co#trast, ma#aers arecom'letely rat$o#al, u#*ersta#* stoc maret $#ec$e#c$es, a#* taea*a#tae o+ them, $# 'art throuh merer *ec$s$o#s% Merers $# th$smo*el are a +orm o+ ar"$trae "y rat$o#al ma#aers o'erat$# $# $#ec$e#tmarets% &h$s theory $s $# a way the o''os$te o+ 1olls (9:;J) hu"r$shy'othes$s o+ cor'orate taeoers, $# wh$ch #a#c$al marets are rat$o#al,


4/8

"ut cor'orate ma#aers are #ot% I# our theory, ma#aers rat$o#allyres'o#* to less-tha#-rat$o#al marets%&h$s 'a'er has 'rese#te* a mo*el o+ stoc-maret-*r$e# ac.u$s$t$o#s% It+alls $#to the ra'$*ly row$# el* o+ "eha$oral cor'orate #a#ce, wh$chsees cor'orate 'ol$c$es such as *e"t a#* e.u$ty $ssua#ce, share

re'urchases, *$$*e#*s, a#* $#estme#t as a res'o#se to maretm$s'r$c$#% oo* *eal o+ em'$r$cal e$*e#ce a''ears to "e co#s$ste#tw$th th$s $ew% Our mo*el taes m$s'r$c$# as $e#% Cut $t also 'o$#ts to a'ower+ul $#ce#t$e +or rms to et the$r e.u$ty oeralue*, so that theyca# mae ac.u$s$t$o#s w$th stoc% I# a more e#eral +ramewor, rms w$thoeralue* e.u$ty m$ht "e a"le to mae ac.u$s$t$o#s, sur$e, a#* row,wh$le rms w$th u#*eralue*, or relat$ely less oeralue*, e.u$ty "ecometaeoer tarets themseles% &he "e#et o+ ha$# a h$h aluat$o# +orma$# ac.u$s$t$o#s also 'o$#ts to a# $#ce#t$e to ra$se a rms stoc 'r$ceee# throuh ear#$#s ma#$'ulat$o#, a 'he#ome#o# whose 'reale#ce $s"ecom$# $#creas$#ly a''are#t% &h$s mo*el $s #ot $#te#*e* to *e#y a role+or real rather tha# ust aluat$o# +actors% St$ll, the mo*el hel's $#ter'ret aoo* *eal o+ e$*e#ce, a#* y$el*s #ew 're*$ct$o#s% s such, $t may a** tothe set o+ +ramewors that #a#c$al eco#om$sts use to eam$#e merersa#* ac.u$s$t$o#s%&he I#+ormat$o# o#te#t o+ Share 1e'urchase Prorams (Grullo#, 200K)

o#trary to the $m'l$cat$o#s o+ ma#y 'ayout theor$es, we #* thata##ou#ceme#ts o+ o'e#-maret share re'urchase 'rorams are #ot+ollowe* "y a# $#crease $# o'erat$# 'er+orma#ce% oweer, we #* thatre'urchas$# rms e'er$e#ce a s$#$ca#t re*uct$o# $# systemat$c r$s

a#* cost o+ ca'$tal relat$e to #o#-re'urchas$# rms% Further, co#s$ste#tw$th the +ree cash-!ow hy'othes$s, we #* that the maret react$o# toshare re'urchase a##ou#ceme#ts $s more 'os$t$e amo# those rms thatare more l$ely to oer$#est% F$#ally, we #* e$*e#ce to $#*$cate that$#estors u#*er- react to re'urchase a##ou#ceme#ts "ecause they $#$t$allyu#*erest$mate the *ecl$#e $# cost o+ ca'$tal% Our o"ect$e $# th$s 'a'er $sto "etter u#*ersta#* the eco#om$c mot$at$o#s "eh$#* the *ec$s$o# tore'urchase shares%

I# th$s 'a'er, we eam$#e whether rms 'ay out cash to the$r sharehol*ersto m$t$ate 'ote#t$al oer$#estme#t "y ma#aeme#t or to s$#al oo*

#ews a"out the rms 'ros'ects% We 'er+orm a systemat$c $#est$at$o# tou#coer whether the $#+ormat$o# co#te#t o+ re'urchases $s a"out rowth $#+uture ear#$#s (a#* other 'rota"$l$ty measures), or whether $t $s relate*to a re*uct$o# $# ae#cy co#!$cts% We ca##ot #* a#y e$*e#ce thatre'urchas$# rms e'er$e#ce a rowth $# 'rota"$l$ty% I+ a#yth$#, thee$*e#ce $#*$cates that 'rota"$l$ty *ecl$#es $# the years a+ter there'urchase% We also #* that re'urchas$# rms *ecrease the$r$#estme#ts% &h$s #*$# 'reclu*es the 'oss$"$l$ty that ear#$#s are l$elyto recoer $# the lo# ru#% Our e$*e#cesuests that the re*uct$o# $# +ree cash !ows a#* systemat$c r$s aresources o+ the 'os$t$e maret react$o# to the re'urchase a##ou#ceme#t%We also #* that the maret react$o# to share re'urchase a##ou#ceme#ts$s stro#er amo# those rms that are more l$ely to oer$#est% &hus,


5/8

whe# ae#cy co#!$cts o+ oer$#estme#t are l$ely to ar$se, these rms$#crease the$r 'ayout to sharehol*ers $# the +orm o+ re'urchases% &he'ote#t$al re*uct$o# $# ae#cy costs a#* the $#+ormat$o# a"out there*uct$o# $# the cost o+ ca'$tal coul* e'la$# why the maret $ews theseacts 'os$t$ely% Oerall, whe# we com"$#e our results w$th the e$*e#ce

co#cer#$# *$$*e#*-$#creas$# rms, $t a''ears that re'urchases a#**$$*e#*s are mot$ate* "y s$m$lar +actors% Whe# +uture $#estme#to''ortu#$t$es are co#tract$#, a# $#crease $# cash 'ayouts co#eys$m'orta#t $#+ormat$o# a"out ma#aeme#t comm$tme#t to re*uce theae#cy costs o+ +ree cash !ow whe# those costs are 'ote#t$ally more'ro#ou#ce*% # $#crease $# cash 'ayouts also co#eys $#+ormat$o# a"outcha#es $# the r$s 'role a#* the cost o+ ca'$tal o+ the rm%I#est$# $# Pr$ate /.u$ty Fu#*s@ Surey (Phal$''ou, 2008)

&h$s l$terature re$ew coers the $ssues +ace* "y 'r$ate e.u$ty +u#*$#estors% It shows what has curre#tly "ee# esta"l$she* $# the l$teraturea#* what has yet to "e $#est$ate*% I# 'art$cular, $t shows the ma#y$m'orta#t .uest$o#s to "e a#swere* "y +uture research% &he surey showsthat the aerae $#estor has o"ta$#e* 'oor retur#s +rom $#estme#ts $#'r$ate e.u$ty +u#*s, 'ote#t$ally "ecause o+ ecess$e +ees% Oerall,$#estors #ee* to a$# +am$l$ar$ty w$th actual r$s, 'ast retur#, a#* s'ec$c+eatures o+ 'r$ate e.u$ty +u#*s% I#crease* +am$l$ar$ty w$ll $m'roe thesusta$#a"$l$ty o+ th$s $#*ustry that 'lays such a ce#tral role $# the eco#omy%

Pr$ate e.u$ty +u#*s, *u""e* Aca'$tal$sms #ew $#sB are $#estme#teh$cles that mae two ma$# ty'es o+ $#estme#ts@ leerae* "uyout (CO)

a#* e#ture ca'$tal (V)% /e# thouh these two ty'es o+ $#estme#t are.u$te *$4ere#t a#* +u#*s +ocus o# e$ther o#e o+ them, e#ture ca'$tal+u#*s a#* leerae*-"uyout +u#*s are ty'$cally stu*$e* toether% &hereaso# $s that 'r$ate e.u$ty rms o+te# $#est $# "oth CO a#* V, ty'$cally$a *$4ere#t +u#*s "ut w$th oerla''$# ma#aeme#t teams% CO +u#*s a#*V +u#*s also share the same ora#$>at$o#al structure (same +ee structure,$ll$.u$*$ty character$st$cs, etc%)% I# a**$t$o#, a u#$.ue +eature o+ 'r$atee.u$ty rms $s that they 'lay a ma#aeme#t role $# the$r 'ort+ol$ocom'a#$es% /e# o# a sam'le that $s clearly "$ase* towar*s w$##ers, $+ theaerae 'er+orma#ce $s 'ro'erly areate* a#* the sam'le suc$e#tly

lare, the# aerae 'er+orma#ce $s lowN (&he 'er+orma#ce o+ 'r$atee.u$ty +u#*s $s lower tha# the 'er+orma#ce o+ the SHP 600 "y as much as3%; 'erce#t a year, a#* the r$s 'ro'ert$es o+ the SHP 600 seem moreattract$e%) 1esearch o# r$s $s st$ll $# $ts early staes% &here $s much to "e*o#e, such as assess$# how +eatures l$e #o#- tra*a"$l$ty or cre*$t l$#ea4ect r$s est$mates% Stu*y$# 'u"l$cly tra*e* $#strume#ts coul* also "e+ru$t+ul, es'ec$ally w$th 'u"l$cly tra*e* LPs (L$m$te* Part#ersh$'s)% O#e o+ the most #owle*ea"le a#* success+ul $#estors $# 'r$atee.u$ty +u#*s $s Da$* Swe#se#% e states a"out th$s $#*ustry@ AStra#ely,h$stor$cal results e#erally +a$l to re!ect the ho'e*-+or e#ha#ce* retur#s,wh$le r$s leels a''ear to +all "elow e'ectat$o#s% #+ortu#ately, 'oorretur#s +rom 'r$ate $#est$# 'ro"a"ly re!ect real$ty, wh$le the low r$se$*e#t $# *ata *escr$"$# 'ast retur#s +rom 'r$ate $#est$# co#st$tutes a


6/8

stat$st$cal arte+actB% 1esearch e$*e#ce sureye* $# th$s re$ew a''ears tosu''ort "oth o+ h$s cla$ms% Poor 'er+orma#ce may come as a sur'r$se tothe #o$ce "ut #ot to ma#y 'eo'le $# the $#*ustry% I#*ee*, most GPs(Ge#eral Part#ersh$'s) a#* some LPs o+te# state that o#ly to'-.uart$le'r$ate e.u$ty +u#*s are worth $#est$# $#% &he .uest$o# $s the# +or LPs to

$*e#t$+y them so that the other +u#*s o out o+ "us$#ess a#* aerae'er+orma#ce loos +a$r% Cut there $s more to 'oor 'er+orma#ce tha# aselect$o# $ssue% It seems that +ees are h$her tha# what most $#estorsreal$>e, a#* cr$t$cs o+ the $#*ustry hae sa$* that 'r$ate e.u$ty +u#*s areAa remu#erat$o# 'acae *resse* u' as a# $#estme#t stratey%B I+$#estors *o #ot lear# +ast e#ouh a"out select$# the r$ht +u#*s a#*or*es$#$# more $#estor-+r$e#*ly co#tracts, the# the $#*ustry m$htcolla'se% It woul* "e a terr$"le sce#ar$o "ecause "oth ty'es o+ 'r$atee.u$ty +u#*s are esse#t$al to the maret eco#omy@ V +u#*s as rowthcatalysts a#* CO +u#*s as healthy ar"$traeurs% It $s o#ly w$th#owle*ea"le LPs a#* trustees that th$s cr$t$cally $m'orta#t $#*ustry ca#e'er$e#ce a susta$#a"le rowth%&he /cl$'se o+ the Pu"l$c or'orat$o# (=e#se#, 9:;:)

&he 'u"l$cly hel* cor'orat$o# has outl$e* $ts use+ul#ess $# ma#y sectors o+the eco#omy% 5ew ora#$>at$o#s are emer$#% &aeoers, leerae*"uyouts, a#* other o$#-'r$ate tra#sact$o#s are ma#$+estat$o#s o+ th$scha#e% ce#tral source o+ waste $# the 'u"l$c cor'orat$o# $s the co#!$ct"etwee# ow#ers a#* ma#aers oer +ree cash !ow% &h$s co#!$ct hel'se'la$# the 'rom$#e#t role o+ *e"t $# the #ew ora#$>at$o#s% &he #ewora#$>at$o#s resolut$o# o+ the co#!$ct e'la$#s how they ca# mot$ate

'eo'le a#* ma#ae resources more e4ect$ely tha# 'u"l$c cor'orat$o#s%

O# Seco#*ary Cuyouts (Deeore, =e#s Mart$# ,2096)

Pr$ate e.u$ty rms $#creas$#ly sell com'a#$es to each other $# seco#*ary"uyouts (SCOs), ra$s$# co#cer#s wh$ch we eam$#e us$# #oel *ata sets%Our e$*e#ce 'a$#ts a #ua#ce* '$cture% SCOs u#*er'er+orm a#* *estroyalue +or $#estors whe# they are ma*e "y "uyers u#*er 'ressure tos'e#*% I#estors the# re*uce the$r ca'$tal allocat$o# to the rms *o$#those tra#sact$o#s% Cut #ot all SCOs are mo#ey-"ur#$# *e$ces% SCOsma*e u#*er #o 'ressure to s'e#* 'er+orm as well as other "uyouts% Whe#

"uyer a#* seller hae com'leme#tary s$ll sets, SCOs out'er+orm other"uyouts% I#estors *o #ot 'ay h$her total tra#sact$o# costs as a result o+SCOs, ee# $+ they hae a stae $# "oth the "uy$# +u#* a#* the sell$#+u#*%

SCOs hae "ecome a lare share o+ 'r$ate e.u$ty tra#sact$o#s% &herowth o+ SCOs has $e# r$se to three maor .uest$o#s@ (9) are SCOsmo#ey-"ur#$# *e$ces +or e#eral 'art#ers reach$# the$r *ea*l$#e +or$#est$# comm$tte* ca'$tal? (2) what alue ca# a #ew 'r$ate e.u$tyow#er a** that the 're$ous 'r$ate e.u$ty ow#er has #ot alrea*y a**e*?(3) whe# l$m$te* 'art#ers are $#este* $# "oth the "uy$# s$*e a#* thesell$# s$*e o+ a# SCO, *o they 'ay a# etra layer o+ tra#sact$o# costs?


7/8

We co#struct seeral u#$.ue *ata sets to $#est$ate these .uest$o#s% We#* that o# aerae, SCOs ma*e close to the $#estme#t *ea*l$#eu#*er'er+orm, are r$s$er, a#* *estroy alue +or $#estors% I#estorsa''ear to 'e#al$>e P/ rms that mae late SCOs@ the +ollow-o#-+u#*s o++u#*s that 'art$c$'ate $# late SCOs are mare*ly smaller%

We u#coer a# $m'orta#t source o+ alue creat$o# $# SCOs@com'leme#tary s$ll sets "etwee# the "uyer a#* the seller% SCOs 'er+orm"etter, a#* create alue +or $#estors, whe# they occur "etwee# a P/ rm+ocus$# o# mar$# rowth a#* a P/ rm +ocus$# o# sales rowth, or"etwee# two P/ rms $# wh$ch the e#eral 'art#ers hae *$4ere#te*ucat$o#al "acrou#*s or career 'aths% SCOs also create alue whe# alo"al +u#* "uys +rom a re$o#al +u#*%

F$#ally, assum$# that GPs #eer retur# ca'$tal to $#estors, we show thatee# whe# a l$m$te* 'art#er $s o# "oth s$*es o+ a# SCO, the tra#sact$o#*oes #ot e#erate etra tra#sact$o# costs +or $#estors, co#trary to aw$*es'rea* $ew% et the ee#tual$ty o+ LP oerla' $s relea#t +or $#estors@"y $#est$# $# +u#*s w$th com'leme#tary s$lls, LPs sta#* to a$# more+rom the$r P/ $#estme#ts, shoul* they #* themseles o# "oth s$*es o+ a#SCO tra#sact$o#%

&he *$s$#terme*$at$o# o+ #a#c$al marets@ D$rect $#est$# $# 'r$atee.u$ty (Fa#, Iash$#a 2096)

We eam$#e 20 years o+ *$rect 'r$ate e.u$ty $#estme#ts "y see# lare$#st$tut$o#s% &hese *$rect $#estme#ts 'er+orm "etter tha# 'u"l$c maret$#*$ces, es'ec$ally "uyout $#estme#ts a#* those ma*e $# the 9::0s%Out'er+orma#ce "y the *$rect $#estme#ts, howeer, relat$e to thecorres'o#*$# 'r$ate e.u$ty +u#* "e#chmars $s l$m$te* a#* co#ce#trate*amo# "uyout tra#sact$o#s% o-$#estme#ts u#*er'er+orm thecorres'o#*$# +u#*s w$th wh$ch they co-$#est, *ue to a# a''are#ta*erse select$o# o+ tra#sact$o#s aa$la"le to these $#estors, wh$le solotra#sact$o#s out'er+orm +u#* "e#chmars% I#estors a"$l$ty to resole$#+ormat$o# 'ro"lems a''ears to "e a# $m'orta#t *r$er o+ solo *ealoutcomes%

Our a#alys$s suests seeral co#clus$o#s@Q&he *$rect $#estme#ts 'er+orm "etter tha# ta$lore* 'u"l$c maret $#*$ces%&he "est 'er+orma#ce $s co#ce#trate* $# the "uyout +u#* $#estme#ts a#*those ma*e $# the 9::0s%Q&here $s l$m$te* e$*e#ce o+ out'er+orma#ce o+ the *$rect $#estme#tsrelat$e to the corres'o#*$# 'r$ate e.u$ty +u#* "e#chmars% For e#ture

ca'$tal (V) *eals, we #* that *$rect $#estme#ts u#*er'er+orm the +u#*"e#chmar, es'ec$ally $# the 9::0s% &h$s $s co#s$ste#t w$th the e$*e#ce


8/8

o# u#$.ue s$lls o+ V +u#*sRas re!ecte* $# the 'ers$ste#ce o+ the$rretur#s (e%%, a'la# a#* Schoar, 2006, arr$s et al%, 2093 a#* ortewea#* Sore#se#, 209K)%Qo-$#estme#ts u#*er'er+orm the $#estme#ts o+ the corres'o#*$# +u#*s

w$th wh$ch they co-$#est, w$th the 'er+orma#ce a' w$*e#$# $# the latterhal+ o+ our sam'le% &h$s u#*er'er+orma#ce o+ co-$#estme#ts, wh$ch areeecute* alo#s$*e 'r$ate e.u$ty rou's (o+te# the same o#es where the$#st$tut$o#s hae +u#* $#estme#ts) a#* are the cor#ersto#e o+ most$#st$tut$o#s *$rect $#estme#t 'rorams, $s sur'r$s$#%KWe 'ro$*ee$*e#ce that th$s u#*er'er+orma#ce a''ears to "e *r$e# "y select$o# (aAlemo#s 'ro"lemB)@ $#st$tut$o#al $#estors ca# o#ly co-$#est $# *eals thatare aa$la"le to them% I# 'art$cular, these tra#sact$o#s are su"sta#t$allylarer tha# a# aerae s'o#sor

s *eal a#* a''ear to "e co#ce#trate* att$mes whe# e 'ost 'er+orma#ce $s relat$ely 'oor% t the same t$me, $t $s$m'orta#t to ac#owle*e that these *$rect $#estme#ts allow rms to 'utsu"sta#t$ally more +u#*s to wor%QWe #* that solo tra#sact$o#s, $%e%, $#estme#ts $#$t$ate* a#* eecute* "y$#estors alo#e, out'er+orm +u#* $#estme#ts% L$e co-$#estme#ts, the'er+orma#ce o+ solo tra#sact$o#s also eh$"$te* *eter$orat$o# oer t$me%I#estors a"$l$ty to resole $#+ormat$o# 'ro"lems a''ears to "e a#$m'orta#t *r$er o+ solo *eal outcomes@ the 'er+orma#ce o+ solo *eals oerco-$#estme#ts $s reater $# sett$#s where $#+ormat$o# 'ro"lems are less$#te#se, such as local a#* later-stae tra#sact$o#s%

artikelen cf

Documents