The present study is based on prior work that studied the financial performance of a sample of leveraged buyouts (LBO) and going-private transactions occurring between 1978 and 1989. That project identified shortcomings of census data collection programs by comparing Census Bureau data to other overlapping data by conducting quality checks of Quarterly Financial Report (QFR) data against other sources such as Standard and Poor’s COMPUSTAT. The present study will extend the methods developed for the 1993 Center for Economic Studies (CES) study over many more years of data to examine the recent phenomenon of private equity buyouts using the QFR data. The researchers will directly compare the LBO of the 1980s with present-era private equity deals.
This will improve the Census Bureau’s understanding of firm structure and ownership change, as well as the impact of these on firm performance. This project will also increase the Census Bureau’s knowledge base regarding the financial and operational performance of private equity buyouts in the United States from 1990 to 2007 and, hence, improve the Census Bureau’s understanding of firm structure and ownership change. The main question to be answered is how do present-era private equity buyouts perform financially and operationally. Moreover, this project will determine whether the short-term (1 year) and the long-term performance (3 years) of private equity buyouts increases, decreases, or remains unchanged for the sample of buyout firms, relative to their industry peers. It will also determine whether the sources of improvements were purely financial (debt) or operational in nature. This can lead to serious implications with regards to firm and national competitiveness. This study will also address the question of how similar today’s private buyouts are vis-a-vis the 1980s LBO. As the recent problems in subprime lending have shown, problems in one debt class can have large repercussions on the economy as a whole.
Fernando Chaddad
David Ravenscraft