There is a vast academic literature that shows that company performance and value improves after a buy-out (BO). This is explained by the use of significant leverage, lower agency problems and tighter governance of private equity (PE) investors enhancing efficiency. Further, a renewed entrepreneurial climate spurs growth and innovation. This paper analyses the sources of value creation after the BO transaction and distinguishes between non-PE backed BOs, PE-backed BOs and investor-led BOs. We hypothesize that value creation is higher in PE-backed BOs compared to non-PE backed BOs, thanks to their tight governance and lower financial constraints. Tight governance leads to increased efficiency (leading to higher margins and more efficient use of assets), while lower financial constraints lead to higher growth in revenues.