RT Journal Article
SR Electronic
T1 Selection Determinants for Private Equity Investments
JF The Journal of Wealth Management
FD Institutional Investor Journals
SP 104
OP 132
DO 10.3905/jwm.2019.1.091
VO 22
IS 4
A1 Raphael Schwartze
A1 Thomas Maier
YR 2020
UL https://pm-research.com/content/22/4/104.abstract
AB This study examines a global universe of public companies and identifies some properties of companies to become takeover targets. The analysis shows that low headcount-related ratios, low advanced performance ratios, and low leverage ratios are most likely to be associated with becoming a takeover candidate for private equity investors. Further, grouping private equity investors into different levels of risk aversion leads to an even more granular description of potential selection determinants of specific types of private equity investors.TOPICS: Wealth management, private equityKey Findings• The key properties of public companies to become takeover targets by PE investors are found to be low leverage, low personnel-related profitability, low cash ratio, low return on equity and return on assets, and the potential to improve the existing inefficiencies.• Long-term-oriented PE investors look for companies with a strong growth potential and a high asset base.• Risk-seeking PE investors focus on factors like return on equity and return on assets, but also look for a high trading turnover of the target company’s stock.