PRIVATE EQUITY: An analysis of German PE-backed IPOs and the long-term value creation of PE firms

The long-term value creation of PE firms has been a rare subject of research. This study is the first of its kind to investigate long-term value creation of PE firms to companies which went public on the German stock exchange as part of the PE exit-strategy. The research was split into two parts. The first part aimed to determine the financial performance of PE-backed companies since its IPOs, whereas the second part focused on the non-financial support of PE firms to its companies and the transmission of longterm know-how. Using a sample of 24 of German PE-backed IPOs, which went public between 2010 and 2014, 9 showed a positive development since its IPO. Moreover, 8 indicated a stable performance over the years, whereas 4 showed a negative trend. Complementary, 2 companies went insolvent and one was bought up almost immediately after its IPO. For the second part, 17 out of the 21 available companies participated in a survey. The survey tried to identify the connection between the impacts of the PE firm in several supporting activities and its long-term persistence after the company’s IPO. The main results were, that the impact and transmission of know-how of PE firms was almost equally rated by the amount of companies by either high or medium. Slightly less companies indicated a rather low contribution and a marginal relation to the PE firm’s influence and its current position. By connecting the results and referring to the aim of this dissertation, PE firms created long-term value, when the company’s financial performance was positive and the PE impact and long-term know-how transmission was rated at a high or medium level. The PE firm party created value, if the conditions are the same with the difference in a stable financial development. As a result, 11 out of 21 PE firms created long term value until today for its portfolio companies, a minority of it at least partly. Particularly value was created for those companies which were hold rather shortly and supported at a high level. On the contrary, the longer the holding period of PE firms and with it the higher intensity of support, the lesser long-term value was created. The relevance of these results and thesis are especially of importance for companies which are hold by PE firms and considering an IPO as a preferred exit strategy as well as filling a gap in literature and providing a basis for future academic research