Final sample consists of 6398 patents from 472 firms granted from 1984 through may 2007.
Buyouts of corporate divisions are most common, followed by private-to-private deals (investments in independent unquoted entities), secondary deals (firms that were already owned by another private equity investor), then public-to-private deals
Robustness Checks:
*Concern one: Private equity investments for which there was already an existing investor, patents may be double-counted. Employs these patents only the first time they appear then drops them. Results are little changed
*Concern two: Only measures citation count during the 3 years after the award. Using a longer window increases accuracy but decreases sample size. Repeats the analysis through the end of the second calendar year after the patent grant and after the fourth year and finds that results are quantitatively similar.
*Concert three: In divisional buyouts corporate parents may retain best patents and only give low quality patents to the PE backed division. This may lead to an apparent increase in quality in the patents applied for after the award. Addresses this issue by using the longer window for patents above and by rerunning cross tabulations and regressions with divisional buyouts excluded from the sample. Key results are little changed by this shift.
Variables:
*patents and other protection methods
*factors hampering innovation activities
===Lerner 2013===
@article{lerner_private_2013,
title = {Private {Equity} and {Investment} in {Innovation}: {Evidence} from {Patents}},
abstract = {The authors' analysis of the patenting activity of 472 companies that received private equity investments between 1986 and 2005 provides suggestive evidence of an increase in the effectiveness (though not necessarily the quantity) of their innovative activities. After such companies received private equity backing, the patents they applied for received more frequent citations than patents awarded before the involvement of PE firms. Companies acquired by private equity also show no sign of deterioration in patent “originality” and “generality,” which have been shown to be fairly reliable indicators of the fundamental nature of the research. And while there is no clear pattern of change in the level of patenting activity, corporate patent portfolios become more focused in the years after the private equity investments. The increases in our measure of patent “impact” are greatest in the areas that constitute the companies' historical core strengths. These findings are likely to prove increasingly important as private equity continues its incursions into growth areas of the economy.},
language = {en},
number = {2},
urldate = {2016-06-17},
journal = {Journal of Applied Corporate Finance},
author = {Lerner, Josh and Sorensen, Morten and Stromberg, Per},
month = jun,
year = {2013},
pages = {95--102},
file = {Lerner et al (2013) - Private Equity and Investment in Innovation.pdf}
}
Lerner et al examine the effect of private equity investment on firm innovation. This version is a summary of the previous ones.
Some takeaways:
*Patent citations used as proxy for quality (which might not be optimal)
*They do adjust for overall average of non-LBO firms
*Uses Seagate as a case study
=LBO Traits/Incidence/Phenomena Papers=
*FA/TA Financial assets (net)/Total Assets (net)
*TA/TAg Total Assets (net)/Total assets (gross)
===Kaplan 1991===
@article{kaplan1991staying,
title={The staying power of leveraged buyouts},
author={Kaplan, Steven N},
journal={Journal of Financial Economics},
volume={29},
number={2},
pages={287--313},
year={1991},
publisher={Elsevier}
abstract={This paper documents the organizational status over time of 183 large leveraged buyouts completed between 1979 and 1986. By August 1990, 62% of the LBOs are privately owned, 14% are independent public companies, and 24% are owned by other public companies. The percentage of LBOs returning to public ownership increases over time, with LBOs remaining private for a median time of 6.82 years. The majority of LBOs, therefore, are neither short-lived nor permanent. The moderate fraction of LBO assets owned by other companies implies that asset sales play a role, but are not the primary motivating force in LBO transactions.}
filename={Kaplan (1991) - The staying power of leveraged buyouts}
}
Implications for the reasons LBOs occur and sources of value in LBO transactions. Describes characteristics, timelines, and stats of LBOs that return to public ownership.
Data:
183 large leveraged buyouts between 1979 and 1986 collected from Securities Data corporation or Morgan Stanley and Company. Post-buyout info obtained from Lotus' Datext databases, Nexis database, Wall street journal articles the year the LBO was completed, and financial reports filed with the SEC
Variables:
*number of LBO's
*total debt to total capital (book value)
*total debt to initial deal value
*interest expense to operating income
*inside equity ownership fraction
===Roden & Lewellen 1995===
*PCASH: the percentage of the total that comes from the use of the target firm's existing cash and marketable securities balances
=Innovation Factors==Kaplan 2009=== @article{kaplan_leveraged_2009, title = {Leveraged {Buyouts} and {Private} {Equity}}, volume = {23}, issn = {0895-3309}, url = {https://Phenomena Paperswww.aeaweb.org/articles?id=10.1257/jep.23.1.121}, doi = {10.1257/jep.23.1.121}, abstract = {In a leveraged buyout, a company is acquired by a specialized investment firm using a relatively small portion of equity and a relatively large portion of outside debt financing. The leveraged buyout investment firms today refer to themselves (and are generally referred to) as private equity firms. We describe and present time series evidence on the private equity industry, considering both firms and transactions. We discuss the existing empirical evidence on the economics of the firms and transactions. We consider similarities and differences between the recent private equity wave and the wave of the 1980s. Finally, we speculate on what the evidence implies for the future of private equity.}, number = {1}, urldate = {2016-06-17}, journal = {Journal of Economic Perspectives}, author = {Kaplan, Steven N. and Stromberg, Per}, month = mar, year = {2009}, pages = {121--146}, file = {Kaplan and Stromberg (2009) - LBOs and Private Equity.pdf} }A comprehensive review of the LBO/private equity literature up to 2009. Should be useful for finding additional sources and catching up with somewhat recent research. ===Cumming et al 2007=== @article{cumming_private_2007, series = {Private {Equity}, {Leveraged} {Buyouts} and {Corporate} {Governance}}, title = {Private equity, leveraged buyouts and governance}, volume = {13}, issn = {0929-1199}, url = {http://www.sciencedirect.com/science/article/pii/S0929119907000272}, doi = {10.1016/j.jcorpfin.2007.04.008}, abstract = {This paper provides an overview of the literature on private equity and leveraged buyouts, focusing on global evidence related to both governance and returns to private equity and leveraged buyouts. We distinguish between financial and real returns to this activity, where the latter refers to productivity and broader performance measures. We also outline a research agenda on this topic.}, number = {4}, urldate = {2016-06-17}, journal = {Journal of Corporate Finance}, author = {Cumming, Douglas and Siegel, Donald S. and Wright, Mike}, month = sep, year = {2007}, keywords = {Corporate governance, Financial and real returns, Management buyouts, Private equity, Total factor productivity}, pages = {439--460}, file ={Cumming et al (2007) - Private equity LBOs and governance.pdf} }
Literature review on LBOs and private equity. Researchers have explored the following in relation to PTP transitions (table 4):
*Eddey et al (1996): Takeover threat
*Evans et al (2002): Liquidity, growth rate, leverage, R&D
*Weir et al (2005a): CEO ownership share, institutional ownership share, CEO Board Chair duality
==James==
===Annotated===In addition, should consider difference between hedge fund and private equity-financed buyouts (hedge funds less hands-on).
====Lehn and Poulsen 1989====
@article{lehn_free_1989,
*FOOTSTEPS (=1 if competing bid or takeover speculation in WSJ)
====Jensen 1988====
@article{jensen_takeovers:_1988,
*Warning signs: large cash flows, acquisition activity, low growth prospects
==LBO Duration=Unsorted====Kaplan 1991=== @article{kaplan1991staying, title={The staying power of leveraged buyouts}, author={Kaplan, Steven N}, journal={Journal of Financial Economics}, volume={29}, number={2}, pages={287--313}, year={1991}, publisher={Elsevier} abstract={This paper documents the organizational status over time of 183 large leveraged buyouts completed between 1979 and 1986. By August 1990, 62% of the LBOs are privately owned, 14% are independent public companies, and 24% are owned by other public companies. The percentage of LBOs returning to public ownership increases over time, with LBOs remaining private for a median time of 6.82 years. The majority of LBOs, therefore, are neither short-lived nor permanent. The moderate fraction of LBO assets owned by other companies implies that asset sales play a role, but are not the primary motivating force in LBO transactions.} filename={Kaplan (1991) - The staying power of leveraged buyouts} }Implications for the reasons LBOs occur and sources of value in LBO transactions. Describes characteristics, timelines, and stats of LBOs that return to public ownership. Data: 183 large leveraged buyouts between 1979 and 1986 collected from Securities Data corporation or Morgan Stanley and Company. Post-buyout info obtained from Lotus' Datext databases, Nexis database, Wall street journal articles the year the LBO was completed, and financial reports filed with the SEC Variables: *number of LBO's *total debt to total capital (book value)*total debt to initial deal value*interest expense to operating income*inside equity ownership fraction
Seeks to establish commonality in the measurement of innovative performance. Its indicators include R&D inputs(expenditures), patent counts, patent citations, and new product announcements. Results of study are that any of these four indicators could be taken as a measure of innovative performance in the broad sense.
=Unsorted=
====Axelson 2013====
@article{axelson_borrow_2013,
title = {Borrow {Cheap}, {Buy} {High}? {The} {Determinants} of {Leverage} and {Pricing} in {Buyouts}},
abstract = {Private equity funds pay particular attention to capital structure when executing leveraged buyouts, creating an interesting setting for examining capital structure theories. Using a large, international sample of buyouts from 1980 to 2008, we find that buyout leverage is unrelated to the cross-sectional factors, suggested by traditional capital structure theories, that drive public firm leverage. Instead, variation in economy-wide credit conditions is the main determinant of leverage in buyouts. Higher deal leverage is associated with higher transaction prices and lower buyout fund returns, suggesting that acquirers overpay when access to credit is easier.},
language = {en},
number = {6},
urldate = {2016-06-17},
journal = {The Journal of Finance},
author = {Axelson, Ulf and Jenkinson, Tim and Strömberg, Per and Weisbach, Michael S.},
month = dec,
year = {2013},
pages = {2223--2267},
file = {Axelson et al (2013) - Determinants of Leverage and Pricing.pdf}
}
Discusses financing and pricing of LBOs. Only tangentially relevant to our project.
====Cloodt et al 2006====
file = {ScienceDirect Full Text PDF:C\:\\Users\\James Chen\\AppData\\Roaming\\Zotero\\Zotero\\Profiles\\g2eepc1b.default\\zotero\\storage\\SEU8CIRN\\Cloodt et al. - 2006 - Mergers and acquisitions Their effect on the inno.pdf:application/pdf;ScienceDirect Snapshot:C\:\\Users\\James Chen\\AppData\\Roaming\\Zotero\\Zotero\\Profiles\\g2eepc1b.default\\zotero\\storage\\RDJIG292\\S004873330600045X.html:text/html}
}
====Van de Gucht 1998====
@article{van_de_gucht_predicting_1998,
title = {Predicting the duration and reversal probability of leveraged buyouts},
abstract = {We examine the probability that a firm will return to public status following a leveraged buyout (LBO) transaction and for those LBOs that will eventually reverse, we examine the factors that impact the timing of the reversal. These two dimensions of the reversal decision are studied by estimating standard and split population hazard models for a sample of 343 LBO transactions. Our results indicate that not all LBO firms eventually will reverse, i.e. the net benefits of private status for some firms appear to be permanent. For those LBOs that will reverse, reversal probabilities are found to increase over the first seven or eight years following a typical LBO, then to decline thereafter.},
number = {4},
urldate = {2016-06-17},
journal = {Journal of Empirical Finance},
author = {Van de Gucht, Linda M. and Moore, William T.},
month = oct,
year = {1998},
pages = {299--315},
file = {ScienceDirect Full Text PDF:C\:\\Users\\James Chen\\AppData\\Roaming\\Zotero\\Zotero\\Profiles\\g2eepc1b.default\\zotero\\storage\\CCNSKDXX\\Van de Gucht and Moore - 1998 - Predicting the duration and reversal probability o.pdf:application/pdf;ScienceDirect Snapshot:C\:\\Users\\James Chen\\AppData\\Roaming\\Zotero\\Zotero\\Profiles\\g2eepc1b.default\\zotero\\storage\\2IA32N4Q\\S0927539897000236.html:text/html}