Agile predators: private equity and the spread of shareholder value strategies to US for-profit colleges

2020 ◽  
Author(s):  
Charlie Eaton
Keyword(s):  
Private Equity ◽  
Shareholder Value ◽  
Publicly Traded ◽  
For Profit ◽  
Cost Cutting ◽  
Equity Ownership ◽  
Privately Held Firms ◽  
Robust Evidence ◽  
Privately Held

Abstract I argue that growth in private equity and publicly traded ownership of US for-profit colleges has created new shareholder-value pressures for schools to maximize returns for investors. Privately held firms, which had long dominated the sector, were converted to private equity ownership through 88 buyouts since 1987. Private equity managers then used IPOs to establish 20 of 35 publicly traded firms that operated in the sector. I use longitudinal panel analyses of 14,212 federally qualified colleges to show that schools under these ownership forms featured unusually high debts and low graduation rates for students. The results (a) provide some of the most robust evidence to date that shareholder value strategies of cost-cutting and implicit contract violations can adversely affect non-labor stakeholders; and (b) help to theorize the growing but understudied role of private equity as a transitional ownership form that spreads shareholder value strategies to privately held firms.

Quintiles IPO

2017 ◽  
pp. 1-24
Author(s):  
David P. Stowell ◽  
Vishwas Setia
Keyword(s):  
Private Equity ◽  
Life Sciences ◽  
List Type ◽  
Publicly Traded ◽  
Discounted Cash Flow ◽  
Investment Bank ◽  
Strategy Process ◽  
Firm Owners ◽  
A Company

Quintiles Transnational Holdings Inc., the largest global provider of biopharmaceutical development and commercial outsourcing services, grew its revenue at a CAGR of 7.3% and EBITDA at 13.9% between 2008 and 2012.The case is set in December 2012–April 2013, when the majority of the firm was owned by founder Dennis Gillings and four private equity firms (Bain Capital, TPG Capital, 3i Capital and Temasek Life Sciences) after it was taken private in a management-led buyout in 2003 and a subsequent buyout in 2008. Five years after the second buyout, the private equity firm owners were looking to monetize their positions and considered different strategic alternatives: M&A sale to strategic or financial buyers, IPO, or capital restructuring through special dividends.Students will step into the role of an associate at the lead investment bank working with Quintiles. They must consider the case information and determine an IPO strategy, process, potential conflicts, and valuation.After reading and analyzing the case, students will be able to: Apply valuation techniques (discounted cash flow (DCF) and publicly traded comparables) in pricing an IPO Analyze the roles of different parties involved in the transaction Discuss the process of a company filing for an IPO Evaluate different strategic alternatives available to a private equity—backed company Address conflict of interest in management—led buyouts

Information asymmetry in CSR reporting: publicly-traded versus privately-held firms

2020 ◽  
Vol 11 (1) ◽  
pp. 207-232 ◽  
Author(s):  
L. Emily Hickman
Keyword(s):  
Information Asymmetry ◽  
Global Reporting Initiative ◽  
Publicly Traded ◽  
Private Companies ◽  
Content Type ◽  
Public Firms ◽  
Csr Reporting ◽  
Reporting Decisions ◽  
Privately Held Firms ◽  
Privately Held

Purpose This paper aims to investigate the motivations behind the publication of corporate social responsibility (CSR) reports, and particularly the effect of information asymmetry between firms and their owners. Design/methodology/approach A natural experiment contrasting the CSR reporting of private vs public firms is used to test whether the degree of information asymmetry is a significant factor in the decision to publish CSR reports. Using a hand-collected sample of the 239 largest US private companies matched with publicly-traded firms, the effect of these inherently different information environments on CSR reporting is tested through logistic regression. Factors suggested by stakeholder and legitimacy theories are tested for their differential impact on private vs public firms’ decisions to publish a CSR report. Findings Results indicate that private firms are less likely to publish a CSR report than similar public firms. Public firms also follow Global Reporting Initiative guidelines more frequently, consistent with signaling report quality to dispersed investors. A subsample of private companies facing greater information asymmetry is found to be similar to public firms in their reporting behavior, reinforcing the link between information asymmetry and CSR disclosure. Further analysis suggests that non-owner stakeholders play an important role in private companies’ CSR reporting decisions. Practical implications In addition to accounting and governance scholars, the findings should interest private firm managers preparing for an initial public offering (IPO), as the evidence suggests that CSR reporting is used to communicate information to dispersed investors. The insight into reporting motivations should be useful to accountants engaged in CSR consultation and assurance. Social implications With the growing attention paid to the CSR performance of firms, demonstrated by the growth in socially responsible investing, the study provides evidence that effective communication of CSR information to investors may play a key role in CSR-engaged firms’ disclosure strategies. Originality/value To the best of the author’s knowledge, this study is the first to analyze the CSR reporting decisions of a large sample of publicly-traded and privately-held firms. The results add to our understanding of what motivates firms to publish CSR reports, highlighting the importance of information asymmetry between the firm and its owners.

A Contextual Analysis of Incomeand Asset-Based Approaches to Private Equity Valuation

2006 ◽  
Vol 20 (1) ◽  
pp. 19-35 ◽  
Author(s):  
David S. Jenkins ◽  
Gregory D. Kane
Keyword(s):  
Private Equity ◽  
General Setting ◽  
Earnings Forecasts ◽  
Analyst Following ◽  
Best Value ◽  
Tangible Assets ◽  
Business Profitability ◽  
Privately Held Firms ◽  
Relative Valuation ◽  
Privately Held

The question of how to best value privately held businesses for purposes of taxation and other legal reasons remains open to debate. In general, valuation models are asset-based, income-based, or hybrid models that aggregate asset and income information. An example of the latter is the controversial excess earnings method recommended by IRS Rev. Rul. 68–609. In this research, we focus on the relative performance of the excess earnings method vis-a`-vis other widely used valuation models. We consider the valuation accuracy of each model in a general setting along with examining contextual performance under varying levels of intangible versus tangible assets and varying levels of business profitability. We show that the hybrid model provides superior valuation accuracy in general and more consistent valuation accuracy across the contexts examined. We also show that the inclusion of two capitalization rates in the excess earnings method, which is required in order to distinguish returns from tangible versus intangible assets, provides increasing relative valuation accuracy over that of the single-rate earnings capitalization model as the two rates diverge. In summary, we demonstrate that for privately held firms, which typically lack analyst following and independent earnings forecasts, the excess earnings method represents a viable valuation alternative.

Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms [with Comments and Discussion]

2006 ◽  
Vol 21 ◽  
pp. 107-179 ◽  
Author(s):  
Steven J. Davis ◽  
John Haltiwanger ◽  
Ron Jarmin ◽  
Javier Miranda ◽  
Christopher Foote ◽  
...  
Keyword(s):  
Growth Rates ◽  
Business Growth ◽  
Publicly Traded ◽  
Privately Held Firms ◽  
Privately Held

scholarly journals Accruals, cash flows and earnings in european privately held firms

2013 ◽  
pp. 133
Author(s):  
Borja Amor Tapia ◽  
María Teresa Tascón Fernández
Keyword(s):  
Cash Flow ◽  
Cash Flows ◽  
Previous Literature ◽  
Private Firms ◽  
Publicly Traded ◽  
Private Companies ◽  
Public Firms ◽  
Publicly Traded Firms ◽  
Privately Held Firms ◽  
Privately Held

Este trabajo examina las propiedades de los ajustes al devengo, los flujos de caja y los resultados en las empresas europeas no cotizadas. A partir de varias hipótesis sobre la persistencia de losresultados y sus componentes, encontramos que las empresas no cotizadas parecen comportarse de forma diferente a la evidencia encontrada previamente sobre las empresas cotizadas. Lasdiferencias son significativas cuando los ajustes al devengo son extremos, dado que la persistencia del ROA y de los flujos de caja siguen patrones de comportamiento distintos a los encontrados en las empresas estadounidenses cotizadas. Pero contrariamente a nuestrashipótesis, las diferencias en la persistencia no son significativas cuando las empresas no cotizadas publican resultados positivos frente a resultados negativos.<br /><br />This paper examines the properties of accruals, cash flows and earnings in European privately held firms. We start from several hypotheses about the persistence of earnings and its components, finding that private companies seem to behave in a different manner than the publicly traded firms tested in previous literature. As hypothesized, differences are significant when accruals are extreme, though in European private firms, persistence of ROA relative to cash flow follows a different pattern than in US public firms. But contrary to our expectations, differences in persistence are not significant when companies report positive versus negative earnings.

scholarly journals The Role of Responsible Ownership and Family in Privately Held Firms with Multiple Owners: Preliminary Findings from the Czech Republic

2020 ◽  
Vol 8 (5) ◽  
pp. 1-17
Author(s):  
Jiří Hnilica ◽  
Lorraine M. Uhlaner ◽  
Ondřej Machek ◽  
Ales Kubíček ◽  
Martin Lukeš ◽  
...  
Keyword(s):  
Czech Republic ◽  
The Czech Republic ◽  
Privately Held Firms ◽  
Responsible Ownership ◽  
Privately Held
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