Practical Applications of LBO and VC Investments in Recent Crises

Abstract

In LBO and VC Investments in Recent Crises, published in the Spring 2021 issue of The Journal of Alternative Investments, Marcel Stark (Livingstone Partners) and Rainer Lauterbach (ISM International School of Management) investigate reasons for the outperformance of private equity (PE) funds relative to public equity. They examine leveraged buyout (LBO) and venture capital (VC) deals and deal flow to industry sectors over time. The authors focus on the dot-com crisis from 2000 to 2002 and the financial crisis from 2007 to 2009. To determine which industries may be relatively resilient to market downturns, they rank the performance of 12 industry sectors over the period studied and during the two crises. Their evidence suggests that some LBO firms and VC firms change their industry focus during crises in a manner that partially explains their outperformance relative to public equity funds.

TOPICS: Private equity, financial crises and financial market history, performance measurement