The purpose of this paper is to identify specific drivers of value creation in secondary buyouts. While this type of private equity deal has risen in importance in recent years, it is not yet well understood. Through an in-depth analysis of the acquisition of Brenntag by BC Partners, we develop propositions on the value creation profile of secondary buyouts.
We use a single case study design to explore the information-rich context of a secondary buyout. The Brenntag case epitomizes the development of a company from forming part of a large conglomerate to being private-equity owned after the primary and secondary buyout, to its final disposition of public listing. Our analysis is based on ten semi-structured interviews with key protagonists and observers, as well as analysis of primary company data and additional secondary data sources.
We propose that even if the investment management and monitoring skills of the primary and secondary private equity group are similar, there is still potential to realize operational improvements in a secondary buyout, due to either early exit of the primary private equity group or measures that further enhance management incentives. In addition, the Brenntag case shows that low information asymmetries can lead to higher leverage and that opportunities for multiple expansions are limited in secondary buyouts.
While a secondary buyout has become a common exit route in recent years, we are the first to undertake an in-depth case analysis of a secondary buyout. Our study helps researchers and practitioners enhance their understanding of drivers behind the value creation profile of secondary buyouts.
The authors thank Stefan Zuschke and Torsten Mack from BC Partners, who provided highly valuable input both in the scoping and review phase. Further, we express our gratitude to all interviewees, namely, Dr Michael Siefke (Bain Capital), Stefan Zuschke and Torsten Mack (BC Partners), Stephen Clark and Georg Müller (Brenntag), Dr Nils Koffka (Freshfields Bruckhaus Deringer), Dr Steffen Kastner (Goldman Sachs), Gerrit Frohn and Karsten Hofacker (Morgan Stanley) and Holger Paul (Frankfurter Allgemeine Zeitung) for generosity with their time and for providing important insights. In addition, we thank Sebastian Wieland for his help in the data collection process.
Achleitner, A.-K., Figge, C. and Lutz, E. (2014), "Value creation drivers in a secondary buyout – the acquisition of Brenntag by BC Partners", Qualitative Research in Financial Markets, Vol. 6 No. 3, pp. 278-301. https://doi.org/10.1108/QRFM-06-2012-0018
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