The Exit Behavior of Private Equity Firms in Eastern Europe: An Empirical Analysis of the Main Exit Strategies

Abstract

The author examines the two main exit routes preferred by private equity funds, initial public offerings (IPOs) and mergers and acquisitions (M&A), using quarterly data for Eastern European countries and covering the period 2000–2014. This article follows the work of Black and Gilson (1998), who confirmed the existence of a positive correlation between the number of IPOs (in year t) and the willingness of institutional investors to allocate funds to private equity firms (in year t + 1). Additionally, this article studies M&A as a second exit strategy for private equity investors by mobilizing the economic techniques that are used in time series analysis. The results show that Eastern European private equity firms prefer M&A exits followed by IPOs. The Granger causality test shows the existence of a unidirectional causality of the number of M&A to the volume of private equity investments in Eastern Europe.

TOPICS: Private equity, emerging markets, statistical methods