Do Private Acquirers Always Pay Little? Difference in Value Creation of Private Equity Funds and Private Operating Firms

• In Event: Shareholder Rights, Corporate Boards and Compensation

Abstract

Bargeron et al. (2008) find that private acquirers pay lower premium than public acquirers do when acquiring public target firms. This paper extends Bargeron et al. (2008) by further investigating whether private equity funds and private operating firms create same value to public targets using Privco, a database focusing on private deals. We hypothesize and find that comparing to public firms and private operating firms, private equity funds pay much less to public target shareholders. This finding is consistent with the clientele effect as some of the investors decide to acquire the targets in the unregistered securities of private and public companies.

Authors

• Jung Yeun Kim, SUNY-Binghamton University

• Linna Shi, SUNY-Binghamton

• Nan Zhou, SUNY-Binghamton