Fueling the buyout machine: fundraising in private equity
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This paper analyzes the impact of performance, investment-firm-related, and macroeconomic variables on fundraising activities in private equity (PE). We use a novel, backward-looking approach to link current to preceding funds, which allows for including several parallel predecessor funds in our analysis. We employ logit and tobit models to a global sample of 1463 fundraising events observed between 2000 and 2010 in order to estimate the probability of raising and the volume of follow-on funds. Our results show that the average buyout duration of past transactions has a negative impact, whereas exits via an initial public offering (IPO) and deals without industry-style drift positively affect fundraising activities. Larger, industry-diversified, and independent PE firms exhibit a higher likelihood of fundraising and collect larger amounts.
KeywordsFundraising Follow-on fund Private equity Leveraged buyout
JEL ClassificationG23 G24 G30 G34
We are grateful for comments from an anonymous referee, Marc Steffen Rapp, and Anna Gerl, as well as those from discussants and participants of the Annual Meeting of the German Academic Association for Business Research (VHB) 2016, Midwest Finance Association (MFA) Annual Meeting 2016, and Paris Financial Management Conference (PFMC) 2015. This paper benefited from valuable data work by Alexander Knauer and Benjamin Hammer. Johanna Stein and Julia Sydow provided excellent research assistance. All remaining errors and omissions remain our own.
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