Recent changes in the market for private equity have led investors to shift their attention away from market beta and towards generating alpha through the exploration of growth opportunities. PE firms increasingly use active ownership to implement these new growth plans. Buy and build strategies have emerged as a feasible and lucrative strategy of active ownership. The add-on acquisitions required when pursuing this strategy and the need to
create value through synergistic effects necessitate post-acquisition integration efforts. Despite its relevance, researchers in the field of strategic management and finance have paid little attention to buy and build strategies. Moreover, they have yet to bridge the findings by scholars and practitioners on post-acquisition integration and active ownership. This paper seeks to fill this gap by answering the research question of how PE firms contribute to the integration process and how they handle task and affective conflicts and exercise management control with regard to the cooperation between the PE firm and the management
of the portfolio company.
Previous work has linked active ownership to capabilities and found that prior business experience is a strong predictor of active ownership, meaning a high level of contribution by the investment firm. This paper complements this work by analyzing active ownership of
private equity firms in the context of post-acquisition integration in buy and build strategies and finds a direct link between capabilities and active ownership through four explanatory theory-building case studies. Birkinshaw et al. (2000)’s study on post-acquisition integration is used as a guiding concept in this paper. They distinguish between task integration, which is
defined as the identification and realization of operational synergies, and human integration, which is defined as the creation of positive attitudes towards the integration and shared identity among employees. This paper creates a practical Framework for Integration
Management on this notion and extends it by additional academic literature and relevant studies of consulting firms. A number of working propositions are derived from the literature and linked to the framework. Each proposition is then tested through within-case analysis and across-case comparison. Based on the evidence, three propositions are revised or extended whereas six propositions are supported. [...]
Inhaltsverzeichnis (Table of Contents)
- Executive summary
- Introduction
- Buy and Build Strategies: An Overview
- Post-Acquisition Integration: A Literature Review
- Active Ownership: Understanding the Role of Private Equity Firms
- Research Question and Methodology
- Theoretical Framework
- Active Ownership and Capabilities
- Post-Acquisition Integration: Task and Human Integration
- The Framework for Integration Management
- Case Studies
- Case Study 1: Company A
- Case Study 2: Company B
- Case Study 3: Company C
- Case Study 4: Company D
- Data Analysis and Discussion
- Within-Case Analysis
- Across-Case Comparison
- Discussion of Findings
- Implications for Practice and Future Research
- Implications for Private Equity Firms
- Implications for Portfolio Company Management
- Directions for Future Research
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This Master thesis aims to investigate the role of private equity (PE) firms in post-acquisition integration within buy and build strategies. The study focuses on how PE firms contribute to the integration process, particularly in managing task and affective conflicts, and their approach to exercising management control. It investigates the link between PE firm capabilities and their active ownership role in buy and build strategies.
- Active ownership by PE firms in buy and build strategies
- The role of PE firms in post-acquisition integration
- The relationship between PE firm capabilities and active ownership
- Task and human integration in buy and build strategies
- The impact of integration capabilities on the success of buy and build strategies
Zusammenfassung der Kapitel (Chapter Summaries)
The thesis begins with an introduction that provides an overview of buy and build strategies, reviews the relevant literature on post-acquisition integration, and elaborates on the role of active ownership in private equity. The research question and methodology are then outlined. Building on existing literature, the theoretical framework outlines the concept of active ownership and its relationship to capabilities, discusses the two main types of post-acquisition integration – task and human integration – and presents the Framework for Integration Management.
The next section delves into four case studies, each examining a different company that has undergone a buy and build strategy. The data collected through these case studies are then analyzed, both within each case and across all four cases. The analysis explores the contributions of PE firms to both task and human integration, examining how PE firms manage conflicts and exercise control in the integration process. The results are then discussed in relation to the theoretical framework.
Finally, the thesis explores the implications of the findings for both private equity firms and the management of portfolio companies. It provides guidance on how to prioritize post-acquisition integration efforts, manage expectations related to the integration process, and prevent conflicts. The thesis concludes with directions for future research, encouraging further exploration of the dynamic relationship between PE firms and their portfolio companies in the context of buy and build strategies.
Schlüsselwörter (Keywords)
This Master thesis focuses on key concepts such as buy and build strategies, post-acquisition integration, active ownership, private equity firms, task integration, human integration, capabilities, and management control. It delves into the empirical analysis of PE firm contributions to integration processes and the strategic implications of active ownership in buy and build strategies.
- Quote paper
- Moritz Breuninger (Author), 2013, Buy and Build Strategies in Management Buyouts, Munich, GRIN Verlag, https://www.grin.com/document/265503
