Post-LBO development
Analysis of Changes in Strategy, Operations, and Performance after the Exit from Leveraged Buyouts in Germany
Private equity and leveraged buyouts have gained traction in Europe, particularly in Germany, serving as catalysts for corporate restructuring and growth. As financial investors begin to exit their investments, questions arise about whether they prioritized short-term cash flow over long-term growth, potentially expropriating value. Critics argue that these investors contribute to job reductions, salary cuts, offshoring, and financial instability within companies. Research has examined the sustainability of performance improvements and analyzed changes in performance indicators, revealing a decline in the financial performance of former LBOs. This decline, which occurs with a time lag, remains inadequately explained, though it appears linked to increased strategic diversification, recurring inefficiencies, and diminished management focus on efficiency. Notably, these findings pertain primarily to companies exiting through public offerings, rather than trade sales. This study aims to enhance the understanding of the post-exit period, addressing the lack of empirical data on how the supervision and management of LBOs change at the time of exit. Existing research on subsequent strategic and operational changes is limited, emphasizing the need for deeper investigation into major corporate activities to better understand performance development.
