Private Equity Investing in Turnarounds and Restructurings
Traditionally buyout firms, private equity funds and other investors showed little interest for underperforming and troubled companies, mainly due to the potentially risky nature and time-consuming work associated with turnaround investments. Besides that, few investors had the skills to fix a troubled company’s problems. Today, in the USA and in Europe turnaround investing is rapidly rising in importance because of several reasons:
- Due to an increasing competition in the deal market, buyout funds and private equity firms are forced to develop specialized and differentiated investing strategies.
- Institutional investors are attracted by high returns as well as by the diversification potential of this asset class, since returns are more closely related to events unique to each individual restructuring situation than to the capital markets.
- With more corporations focusing on their core business and divesting unprofitable business units, the number of opportunities for turnaround investors has increased considerably and is likely to increase even further.
Though academic interest for turnaround investments has risen, little systematic research has been done in this field so far. Who are the players in this market? How do their investing strategies look like? What are the characteristics of the turnaround investing process? What do the most successful investors do differently? What are the performance attributes of this asset class? The purpose of my dissertation is to answer these questions. The dissertation includes a survey of turnaround investors in the United States and Canada as well as case studies and interviews with a number of experienced turnaround professionals.
Table of Content
Working Paper: “Erfolgreiches Management von Turnaround-Investitionen” (pdf file)