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What is different about private equity-backed acquirers?

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What is different about private equity-backed acquirers? / Hammer, Benjamin; Hinrichs, Heiko; Schweizer, Denis.

In: Review of Financial Economics, Vol. 40, No. 2, 30.04.2022, p. 117-149.

Research output: Contribution to Journal/MagazineJournal articlepeer-review

Harvard

Hammer, B, Hinrichs, H & Schweizer, D 2022, 'What is different about private equity-backed acquirers?', Review of Financial Economics, vol. 40, no. 2, pp. 117-149. https://doi.org/10.1002/rfe.1128

APA

Hammer, B., Hinrichs, H., & Schweizer, D. (2022). What is different about private equity-backed acquirers? Review of Financial Economics, 40(2), 117-149. https://doi.org/10.1002/rfe.1128

Vancouver

Hammer B, Hinrichs H, Schweizer D. What is different about private equity-backed acquirers? Review of Financial Economics. 2022 Apr 30;40(2):117-149. https://doi.org/10.1002/rfe.1128

Author

Hammer, Benjamin ; Hinrichs, Heiko ; Schweizer, Denis. / What is different about private equity-backed acquirers?. In: Review of Financial Economics. 2022 ; Vol. 40, No. 2. pp. 117-149.

Bibtex

@article{20687453b4cd40538777d98c19c9645f,
title = "What is different about private equity-backed acquirers?",
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.",
keywords = "add-on acquisition, buy-and-build, leveraged buyout, M&A, private equity",
author = "Benjamin Hammer and Heiko Hinrichs and Denis Schweizer",
year = "2022",
month = apr,
day = "30",
doi = "10.1002/rfe.1128",
language = "English",
volume = "40",
pages = "117--149",
journal = "Review of Financial Economics",
issn = "1058-3300",
publisher = "Elsevier Inc.",
number = "2",

}

RIS

TY - JOUR

T1 - What is different about private equity-backed acquirers?

AU - Hammer, Benjamin

AU - Hinrichs, Heiko

AU - Schweizer, Denis

PY - 2022/4/30

Y1 - 2022/4/30

N2 - 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.

AB - 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.

KW - add-on acquisition

KW - buy-and-build

KW - leveraged buyout

KW - M&A

KW - private equity

U2 - 10.1002/rfe.1128

DO - 10.1002/rfe.1128

M3 - Journal article

AN - SCOPUS:85103386482

VL - 40

SP - 117

EP - 149

JO - Review of Financial Economics

JF - Review of Financial Economics

SN - 1058-3300

IS - 2

ER -