Managing Diversified Portfolios: What Multi-Business Firms Can Learn from Private Equity

by Daniel O. Klier

Overview

There has been a long tradition of research on the relation between diversification and performance of public corporations in the strategy and finance fields. As for private equity portfolios, research on this matter is rather scarce. From a theoretical as well as from a practical perspective, however, it is interesting to know more about the relation between private equity portfolio diversification and performance, how private equity firms manage their portfolios, and what public companies can learn from private equity firms. These are the research questions which are addressed in Daniel Klier’s research. In order to answer these questions, the author uses a two-tier research design. As a first step, he compares the diversification-performance link of public corporations and private equity firms. With respect to the private equity sample and the ope- tionalization of the relevant variables, the study is highly innovative in terms of generating the PE sample from databases like Preqin and Dealogic, constructing a diversification measure from transaction data, and developing comparable perfo- ance measures for private equity firms as well as traditional multi-business firms. As the second step, which is exploratory in nature, the author explores m- agement models of PE firms. The sample of 20 US and Europe-based private equity firms is unique and of high quality, because the author succeeded in getting in-depth interviews with top decision makers of PE firms. The exploratory study extracts three clusters of management models that PE firms are using, and their relation to performance.

Product Details

ISBN-13:	9783790825824
Publisher:	Physica-Verlag HD
Publication date:	12/15/2010
Series:	Contributions to Management Science
Edition description:	Softcover reprint of hardcover 1st ed. 2009
Pages:	295
Product dimensions:	6.10(w) x 9.25(h) x 0.03(d)

Table of Contents

Introduction.- Research Motivation.- Research Objective.- Structure of Dissertation.- Diversification in Corporations.- Definition of Diversification.- Overview of Academic Research on Corporate Diversification.- Diversification/Performance.- Managing Diversified Portfolios.- Introduction to the Private Equity Industry and the Role of Diversification.- Overview of the Private Equity Industry.- Profile of the Leveraged Buyout Segment.- Diversification in Private Equity.- Comparison of Private Equity Firms and Diversified Corporations.- General Research Design.- Starting Position in Academic Literature.- Direction of Research.- Empirical Research Design.- Empirical Part I – Diversification/Performance.- Hypotheses.- Methodology.- Empirical Results.- Discussion of Results.- Empirical Part II – Managing Diversified Portfolios.- Exploratory Framework.- Methodology.- Empirical Results.- Discussion.- Conclusion/Outlook.- Implications for Private Equity Managers.- Implications for Investors/Corporate Managers.