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Publications
  • 2015
  • Working Paper
  • HBS Working Paper Series

What Do Private Equity Firms Say They Do?

By: Paul A. Gompers, Steven N. Kaplan and Vladimir Mukharlyamov
  • Format:Print
  • | Language:English
  • | Pages:66
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Abstract

We survey 79 private equity investors with combined assets under management (AUM) of over $750 billion about their practices in firm valuation, capital structure, governance, and value creation. Investors rely primarily on internal rate of return (IRR) and multiples to evaluate investments. Their limited partners (LPs) focus more on absolute performance. Capital structure choice is based equally on optimal trade-off and market timing considerations. PE investors anticipate adding value to portfolio companies, with a greater focus on increasing growth than on reducing costs. We also explore how the actions that PE managers say they take group into specific firm strategies and how those strategies are related to firm founder characteristics.

Keywords

Governance; Value Creation; Private Equity; Capital Structure; Valuation; Management Practices and Processes

Citation

Gompers, Paul A., Steven N. Kaplan, and Vladimir Mukharlyamov. "What Do Private Equity Firms Say They Do?" Harvard Business School Working Paper, No. 15-081, April 2015.
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About The Author

Paul A. Gompers

Entrepreneurial Management
→More Publications

Related Work

    • Journal of Financial Economics

    What Do Private Equity Firms Say They Do?

    By: Paul A. Gompers, Steven N. Kaplan and Vladimir Mukharlyamov
Related Work
  • What Do Private Equity Firms Say They Do? By: Paul A. Gompers, Steven N. Kaplan and Vladimir Mukharlyamov
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