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• Working Paper | HBS Working Paper Series | 2019

  The Economic Effects of Private Equity Buyouts

  Steven J. Davis, John Haltiwanger, Kyle Handley, Ben Lipsius, Josh Lerner and Javier Miranda

  We examine thousands of U.S. private equity (PE) buyouts from 1980 to 2013, a period that saw huge swings in credit market tightness and GDP growth. Our results show striking, systematic differences in the real-side effects of PE buyouts, depending on buyout type and external conditions. Employment at target firms shrinks 13% over two years in buyouts of publicly listed firms but expands 13% in buyouts of privately held firms, both relative to contemporaneous outcomes at control firms. Labor productivity rises 8% at targets over two years post buyout (again, relative to controls), with large gains for both public-to-private and private-to-private buyouts. Target productivity gains are larger yet for deals executed amidst tight credit conditions. A post-buyout widening of credit spreads or slowdown in GDP growth lowers employment growth at targets and sharply curtails productivity gains in public-to-private and divisional buyouts. Average earnings per worker fall by 1.7% at target firms after buyouts, largely erasing a pre-buyout wage premium relative to controls. Wage effects are also heterogeneous. In these and other respects, the economic effects of private equity vary greatly by buyout type and with external conditions.

  Citation:

  Davis, Steven J., John Haltiwanger, Kyle Handley, Ben Lipsius, Josh Lerner, and Javier Miranda. "The Economic Effects of Private Equity Buyouts." Harvard Business School Working Paper, No. 20-046, October 2019.  View Details

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• Teaching Note | HBS Case Collection | October 2019

  Granite Equity Partners

  Victoria Ivashina and Terrence Shu

  This teaching note accompanies HBS case 219-040, “Granite Equity Partners,” which follows the private equity firm as it evaluates the potential acquisition of Tyrell Corp., a Minnesota-based quality control biomaterials company. Granite Equity’s fund was different from most other private equity funds in that it had a perpetual, or “evergreen,” structure, meaning it invested in assets without a defined holding period. The case and teaching note describe the unique aspects of perpetual funds, their advantages and disadvantages compared to traditional, finite-life funds, and their impact to liquidity and returns.

  Keywords: finance; private equity; Private Equity Exit; Investing; fund exit; fund management; asset management; wealth management; liquidity; buyout; exit strategy; preferred shares; Convertible notes; Minnesota; United States;

  Citation:

  Ivashina, Victoria, and Terrence Shu. "Granite Equity Partners." Harvard Business School Teaching Note 820-062, October 2019.  View Details

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• Case | HBS Case Collection | October 2019

  Kaspi.kz IPO

  Victoria Ivashina and Esel Çekin

  This case follows Kaspi.kz, a private equity (Baring Vostok) co-owned retail bank in Central Asia that evolved into a fintech, payments and e-commerce company. It provides insights into private equity financing, portfolio company management, and initial public offering practices. In particular, the case focuses on (i) the bank’s journey from a traditional bank that serviced only corporations to an online platform, and (ii) the timing and process of preparation for an IPO. The management initially concentrated on profitability, but they soon shifted their emphasis to customer experience. The results were rewarding: Kaspi.kz became the number one player in online commerce, online payments, and consumer financing in Kazakhstan. The challenge of the IPO decisions is its timing: communicating the success of the fast transformation of the firm and its potential for further growth, especially in an emerging market like Kazakhstan, was far from trivial. From a business perspective, even a short delay of six months could potentially add millions of dollars to its value. Kaspi.kz’s private equity investor was interested in commencing a formal exit via an IPO, but the valuation was an important consideration. The case also provides a unique insight into financial fragility of the retail banking model, and how integration into an e-commerce platform interacts with the retail banking model.

  Keywords: Finance; Central Asia;

  Citation:

  Ivashina, Victoria, and Esel Çekin. "Kaspi.kz IPO." Harvard Business School Case 220-007, October 2019.  View Details

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