Leveraged buyouts in Spain: Organic growth or industry consolidation?

Private equity controlled firms are often utilized as platforms for the consolidation of industries. Using a sample of Spanish firms acquired in leveraged buyouts, we argue that add-on acquisitions are distorting conclusions presented in the literature. For instance, Boucly et al. (2011), Bernstein et al. (2019), Battistin et al. (2017) and others associate buyouts, and specifically leveraged buyouts, with growth. We present a simple but novel approach to isolate organic growth and observe that depreciation is greater than capital expenditures. While Bansraj et al. (2022) documents that in Europe, organic sales growth is negative, and acquisitions mask this decline, we focus on investment. Our results show that industry consolidation is also masking a decline in economically important investment. We also study outcomes, comparing the bankruptcy rate in our sample to a propensity score matched set of control firms. We find that leveraged buyouts in Spain are accelerating industry consolidation without visible operating performance improvements or long-term value creation.