The Performance of Buyout-Backed IPOs

Sammanfattning

This study investigates the post-IPO performance of 108 buyout-backed IPOs in the Nordic stock markets, listed between 2010 and 2022. Using buy-and-hold abnormal returns (BHAR), the study examines whether buyout-backed IPOs generate abnormal returns, whether they outperform venture capital- and non-private capital-backed IPOs, and whether pre-IPO holding period and IPO market conditions explain return variation. The results show positive BHAR for buyout-backed IPOs, especially over three years, but limited evidence that they outperform venture capital- and non-private capital-backed IPOs. Longer holding periods are associated with weaker three-year BHAR, with the effect mainly driven by firms held for more than seven years. Additionally, favourable IPO market conditions are also strongly linked to shorter holding periods. These findings are mainly attributed to buyout sponsors' active governance, firm selection, market timing, reputation considerations, and holding period dynamics, where holding period is defined as the time between the initial buyout transaction and the subsequent IPO.