The Global Economic Impact of Private Equity Report 2008 - World ...

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TablesTable 3: Change in the board composition of LBOs onlyThis table shows the change in the board composition whenthe firm is taken private. Only LBOs are considered. Wemeasure the board composition of the last board before thecompany is taken private (before) and of the second boardobserved after the company is taken private (after). Wedistinguish between cases where the CEO changes afterthe buyout and cases where the CEO does not change.T‐statistics of the difference between these two cases andof the difference between the board before and after areprovided. Panel A reports the number of outside directorssitting on the board (as a percentage of total directors), PanelB reports the number of insiders (CEO, management andother insiders) and Panel C reports the number of LBOsponsors (partners or employees of private equity firmsbacking the LBO).Panel A: Percentage of outsiders sitting on the board(m) (l) (m) - (l)No CEO CEOchange change t-statn=40 n=45(b) Before 42% 44% -0.56(a) After 9% 10% -0.36(b) - (a) t-stat 11.04 11.53(m) (l) (m) - (l)No CEO CEOChange Change t-statChange inpercentageafter event 34% 35% -0.24Panel B: Percentage of insiders sitting on the board(m) (l) (m) - (l)No CEO CEOchange change t-statn=40 n=45(b) Before 57% 55% 0.64(a) After 61% 47% 2.87(b) - (a) t-stat ‐1.01 1.80(m) (l) (m) - (l)No CEO CEOchange change t-statChange inpercentage after event - ‐4% 8% ‐2.28Table 4: Differences between exited and non‐exiteddeals (LBOs only)Panel A: Change in the board size by exit(m) (l) (m) - (l)No exit Exit t-statn=46 n=41(b) Before 6.61 6.39 0.60(a) After 5.52 5.32 0.46(b) - (a) t-stat 2.86 2.50(m) (l) (m) - (l)Change in size No exit Exit t-statafter event 1.09 1.07 0.03Panel B: Percentage of insiders sitting on the board(m) (l) (m) - (l)No exit Exit t-statn=46 n=41(b) Before 55% 55% -0.17(a) After 49% 58% -1.54(b) - (a) t-stat 1.27 -0.47Change in percentage(m) (l) (m) - (l)No exit Exit t-statafter event 5% ‐2% 1.44Panel C: Percentage of LBO sponsors sitting on the board(m) (l) (m) - (l)No exit Exit t-statn=46 n=41(b) Before ‐ ‐ ‐(a) After 35% 26% 1.75(b) - (a) t-stat ‐ ‐Panel D: Percentage of CEO changes(m) (l) (m) - (l)No exit Exit t-statn=46 n=39CEO change 61% 44% 1.59Panel C: Percentage of LBO sponsors sitting on the board(m) (l) (m) - (l)No CEO CEOchange change t-statn=40 n=45(b) Before ‐ ‐ ‐(a) After 25% 37% -2.35(b) - (a) t-stat ‐ ‐80 Large-sample studies: Corporate governanceThe Global Economic Impact of Private Equity Report 2008
Table 5: Changes in the board size, multivariate analysisThis table reports regression coefficients (and T‐statistics in parentheses) for various dependent variables and modelspecifications. The dependent variables are the board size change, defined as the difference in the number of people onthe board before and after the LBO, and the percentage change in board size. Firm size is the enterprise value implied bythe LBO and number of LBO sponsors is the number of PE funds backing the LBO.Change in CEO at LBO is a dummy that takes value one if there has been a CEO change from before to after the LBO.Experienced sponsors and bank-affiliated sponsors are dummies that take value one if at least one of the PE firms backing theLBO is an experienced firm or if the leading sponsor is a bank-affiliated PE firm. 3i dummy takes value 1 if the leading sponsoris 3i. Fraction of outsiders before they LBO with CEO experience measures the number of outsiders on the board before theLBO who were or had been CEOs in other companies. Real Estate is a dummy that takes value one if the company is in thereal estate sector. One, two or three asterisks means that the coefficients are significant with a confidence interval of,respectively, 10%, 5% and 1%.Board size Board size % Board % BoardDependent variable change change size change size changeReg 1 Reg 2 Reg 3 Reg 4Intercept 4.71*** 4.76*** 0.7*** 0.08(3.58) (3.67) (3.57) (0.31)Firm size (billion $) ‐0.42 ‐0.43 ‐0.05 ‐0.14***(-1.40) (-1.44) (-1.06) (-2.90)Change in CEO at LBO ‐0.74 -1.04** ‐0.12* ‐0.12*(-1.60) (-2.14) (-1.78) (-1.82)Number of LBO sponsors ‐0.51 ‐0.51 ‐0.1 ‐0.08(-1.19) (-1.20) (-1.51) (-1.35)Experienced sponsor -1.88** -1.98** -0.28** ‐0.25**(-2.16) (-2.30) (-2.19) (-2.07)Bank-affiliated sponsor ‐0.71 ‐0.58 ‐0.12 ‐0.1(-1.06) (-0.88) (-1.22) (-1.13)Fraction of outsiders before the LBO - ‐1.08 ‐1.43 ‐0.11 ‐0.04(-0.71) (-0.95) (-0.47) (-0.18)Fraction of outsiders before the LBO with CEO exp. 1.58*(1.82)Average size of board before LBO 0.08***(3.70)Real estate ‐0.66 ‐0.83 ‐0.07 0.04(-0.83) (-1.06) (-0.57) (0.35)Exited deal ‐0.34 ‐0.31 ‐0.08 ‐0.09(-0.69) (-0.65) (-1.14) (-1.35)3i dummy 0.52 0.58 0.04 0.05(0.46) (0.52) (0.21) (0.29)Adjusted R-squared 6.8% 9.5% 6.2% 19.4%N 87 87 87 87The Global Economic Impact of Private Equity Report 2008 Large-sample studies: Corporate governance 81
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The Globalization of Alternative In
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ContributorsCo-editorsAnuradha Guru
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PrefaceKevin SteinbergChief Operati
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Letter on behalf of the Advisory Bo
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Executive summaryJosh lernerHarvard
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• Private equity-backed companies
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C. Indian casesThe two India cases,
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Part 1Large-sample studiesThe Globa
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The new demography of private equit
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among US publicly traded firms, it
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should be fairly complete. While th
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according to Moody’s (Hamilton et
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draining public markets of firms. I
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FIguresFigure 1A: LBO transactions
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TablesTable 1: Capital IQ 1980s cov
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Table 2: Magnitude and growth of LB
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Table 4: Exits of individual LBO tr
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Table 6: Determinants of exit succe
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Table 7: Ultimate staying power of
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Appendix 1: Imputed enterprise valu
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Private equity and long-run investm
Page 47 and 48: alternative names associated with t
Page 49 and 50: 4. Finally, we explore whether firm
Page 51 and 52: When we estimate these regressions,
Page 53 and 54: cutting back on the number of filin
Page 55 and 56: Table 1: Summary statisticsPanel D:
Page 57 and 58: Table 4: Relative citation intensit
Page 59 and 60: figuresFigure 1: Number of private
Page 61 and 62: Private equity and employment*steve
Page 63 and 64: Especially when taken together, our
Page 65 and 66: centred on the transaction year ide
Page 67 and 68: and Vartia 1985.) Aggregate employm
Page 69 and 70: sectors. In Retail Trade, the cumul
Page 71 and 72: employment-weighted acquisition rat
Page 73 and 74: FIguresFigure 1: Matches of private
Page 75 and 76: Figure 6:Figure 6A: Comparison of n
Page 77 and 78: Figure 8:Figure 8A: Comparison of j
Page 79 and 80: Figure 11: Variation in impact in e
Page 81 and 82: Figure 12: Differences in impact on
Page 83 and 84: Private equity and corporate govern
Page 85 and 86: et al (2007) track the evolution of
Page 87 and 88: groups aim to improve firm performa
Page 89 and 90: distribution of the LBO sponsors, m
Page 91 and 92: the most difficult cases. This stor
Page 93 and 94: to see whether these changes of CEO
Page 95 and 96: Figure 3:This figure represents the
Page 97: TablesTable 1: Company size descrip
Page 101 and 102: Table 7: Board turnoverPanel A: Siz
Page 103 and 104: Part 2Case studiesThe Global Econom
Page 105 and 106: European private equity cases: intr
Page 107 and 108: Exhibit 1: Private equity fund size
Page 109 and 110: Messer Griesheimann-kristin achleit
Page 111 and 112: ealized it was not possible to grow
Page 113 and 114: The deal with Allianz Capital partn
Page 115 and 116: the deal, the private equity invest
Page 117 and 118: Exhibit 1: The Messer Griesheim dea
Page 119 and 120: Exhibit 5: Post buyout structureMes
Page 121 and 122: New Lookann-kristin achleitnerTechn
Page 123 and 124: feet. This restricted store space w
Page 125 and 126: institutional investors why this in
Page 127 and 128: Although a public listing did not a
Page 129 and 130: Exhibit 5: Employment development a
Page 131 and 132: Chinese private equity cases: intro
Page 133 and 134: Hony Capital and China Glass Holdin
Page 135 and 136: Hony’s Chinese name means ambitio
Page 137 and 138: Establishing early agreement on pos
Page 139 and 140: Executing the IPOEach of the initia
Page 141 and 142: Exhibit 1A: Summary of Hony Capital
Page 143 and 144: Exhibit 4: Members of the China Gla
Page 145 and 146: Exhibit 6A: China Glass post‐acqu
Page 147 and 148: Exhibit 8: China Glass stock price
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3i Group plc and Little Sheep*Lily
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y an aggressive franchise strategy,
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soul” of the business. But there
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Exhibit 1: Summary information on 3
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Exhibit 6: An excerpt from the 180-
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Indian private equity cases: introd
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ICICI Venture and Subhiksha *Lily F
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investment,” recalled Deshpande.
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2005 - 2007: Moderator, protector a
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Exhibit 3: Subhiksha’s board comp
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Warburg Pincus and Bharti Tele‐Ve
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founded two companies at this time
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By 2003 this restructuring task was
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Exhibit 1C: Private equity investme
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Exhibit 4B: Bharti cellular footpri
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Exhibit 6: Summary of Bharti’s fi
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Exhibit 7: Bharti’s board structu
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In the 1993‐94 academic year, he
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consumer products. She was also a R
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AcknowledgementsJosh LernerHarvard
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The World Economic Forum is an inde
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