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Managing Diversified Portfolios What Multi-Business Firms Can Learn from Private Equity

:	Daniel O. Klier
:	Managing Diversified Portfolios What Multi-Business Firms Can Learn from Private Equity
:	Physica-Verlag
:	9783790821734
:	1
:	CHF 85.30
:

:	Management
:	English

:	295
:	Wasserzeichen/DRM
:	PC/MAC/eReader/Tablet
:	PDF

There has been a long tradition of research on the relation between diversification and performance of public corporations in the strategy and finance fields. As for private equity portfolios, research on this matter is rather scarce. From a theoretical as well as from a practical perspective, however, it is interesting to know more about the relation between private equity portfolio diversification and performance, how private equity firms manage their portfolios, and what public companies can learn from private equity firms. These are the research questions which are addressed in Daniel Klier's research. In order to answer these questions, the author uses a two-tier research design. As a first step, he compares the diversification-performance link of public corporations and private equity firms. With respect to the private equity sample and the ope- tionalization of the relevant variables, the study is highly innovative in terms of generating the PE sample from databases like Preqin and Dealogic, constructing a diversification measure from transaction data, and developing comparable perfo- ance measures for private equity firms as well as traditional multi-business firms. As the second step, which is exploratory in nature, the author explores m- agement models of PE firms. The sample of 20 US and Europe-based private equity firms is unique and of high quality, because the author succeeded in getting in-depth interviews with top decision makers of PE firms. The exploratory study extracts three clusters of management models that PE firms are using, and their relation to performance.

	Foreword	5
	Acknowledgements	6
	Contents	8
	Abbreviations	12
	List of Figures	14
	List of Tables	16
	1 Introduction	18
	1.1 Research Motivation	19
	1.1.1 Practical Relevance	19
	1.1.2 Theoretical Relevance	20
	1.2 Research Objective	22
	1.2.1 Diversification and Performance	22
	1.2.2 Managing Diversified Portfolios	23
	1.3 Structure of Dissertation	24
	2 Diversification in Corporations	26
	2.1 Definition of Diversification	26
	2.1.1 Diversification as Process	27
	2.1.2 Diversification as Status	27
	2.2 Overview of Academic Research on Corporate Diversification	28
	2.2.1 General Overview of Academic Research	29
	2.2.2 Motives for Diversification	31
	2.2.3 Entry into New Businesses	36
	2.2.4 Structure of Multi-Business Firms	39
	2.2.5 Management of Multi-Business Firms	41
	2.2.6 Financial Implications of Diversification	44
	2.3 Diversification and Performance	45
	2.3.1 Measures of Diversification	46
	2.3.2 Influence of Diversification on Valuation	49
	2.3.3 Influence of Diversification on Financial Performance	52
	2.4 Managing Diversified Portfolios	55
	2.4.1 Value of the Parent Company	56
	2.4.2 Governance Model in Multi-Business Firms	58
	2.4.3 Availability of Central Functions and Resources	62
	2.4.4 Leverage of Resources and Competences across Businesses	64
	2.4.5 Portfolio Management in Multi-Business Firms	66
	3 Introduction to the Private Equity Industry and the Role of Diversification	70
	3.1 Overview of the Private Equity Industry	70
	3.1.1 Definition of Private Equity	71
	3.1.2 Development of the Industry	72
	3.1.3 Structure of the Industry	76
	3.2 Profile of the Leveraged Buyout Segment	82
	3.2.1 Key Characteristics of Leveraged Buyouts	82
	3.2.2 Leveraged Buyout Landscape	88
	3.2.3 Value Creation Techniques	89
	3.2.4 Performance of Leveraged Buyout Investments	97
	3.2.5 Industry Trends and Future	101
	3.3 Diversification in Private Equity	103
	3.3.1 Diversification and Performance	104
	3.3.2 Managing Diversified Portfolios	105
	3.4 Comparison of Private Equity Firms and Diversified Corporations	108
	3.4.1 Acquisition and Diversification Strategy	109
	3.4.2 Portfolio and Divestiture Strategy	109
	3.4.3 Role of the Parent	110
	3.4.4 Role of the Operating Unit	111
	4 General Research Design	113
	4.1 Starting Position in Academic Literature: a Synthesis	113
	4.1.1 Diversification Research in Corporations	114
	4.1.2 Diversification Research in Private Equity	115
	4.2 Direction of Research	116
	4.2.1 Research Direction “Diversification and Performance”	116
	4.2.2 Research Direction “Managing Diversified Portfolios”	117
	4.3 Empirical Research Design	119
	4.3.1 Research Design “Diversification and Performance”	119
	4.3.2 Research Design “Managing Diversified Portfolios”	122
	5 Empirical Part I: Diversification and Performance	127
	5.1 Hypotheses	127
	5.1.1 Performance: Private Equity vs. Public Corporations	128
	5.1.2 Diversification and Performance in Private Equity	129
	5.1.3 Diversification and Performance: Private Equity vs. Public Corporations	130
	5.2 Methodology	131
	5.2.1 Data Sample	131
	5.2.2 Diversification Measures	138
	5.2.3 Performance Measures	142
	5.3 Empirical Results	145
	5.3.1 Performance: Private Equity vs. Public Corporations	146
	5.3.2 Diversification and Performance in Private Equity	151
	5.3.3 Diversification and Performance: Private Equity vs. Public Corporations	167
	5.4 Discussion of Results	178
	5.4.1 Diversification in Private Equity	179
	5.4.2 Performance Drivers in Private Equity	181
	5.4.3 Comparison Private Equity vs. Public Equity	186
	5.4.4 Limitations of Research	188
	6 Empirical Part II: Managing Diversified Portfolios	190
	6.1 Exploratory Framework	191
	6.1.1 General Structure	191
	6.1.2 Influencing Factors	192
	6.1.3 Firm Conduct	194
	6.1.4 Private Equity Performance	196
	6.1.5 Feedback Mechanisms	196
	6.2 Methodology	197
	6.2.1 Sample for Exploratory Research	197
	6.2.2 Sources of Information	200
	6.