What is different about private equity-backed acquirers?

Hammer, Benjamin and Hinrichs, Heiko and Schweizer, Denis (2021) What is different about private equity-backed acquirers? Review of Financial Economics. ISSN 1058-3300

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Abstract

This paper investigates whether private equity (PE)-backed acquirers have a “parenting advantage” in the mergers & acquisitions (M&A) market. We employ a sample of 788 PE-backed firms and a carefully matched control group of 6,652 non-PE-backed peers, for which we observe the entire acquisition history over a 19-year time span. Difference-in-differences estimates suggest that PE backing induces a sizeable but short-lived boost to acquisition activity, while the type and complexity of acquisitions are similar to those of non-PE-backed peers. These results are consistent with the idea that PE backing enhances execution and speed in the M&A market. We find that portfolio firms benefit from this boost through improved valuations and margins. The extent to which this is true, however, depends on the institutional setting of the PE owner. Our results indicate that add-on acquisitions are detrimental if PE owners are late buyers or suffer from limited attention problems.

Item Type:
Journal Article
Journal or Publication Title:
Review of Financial Economics
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000/2002
Subjects:
ID Code:
154615
Deposited By:
Deposited On:
06 May 2021 11:15
Refereed?:
Yes
Published?:
Published
Last Modified:
09 Jun 2021 05:56