Private Equity Acquisitions and Strategic Buyers: Information Discounts versus Synergies

Christian Riis Flor, Peter Norman Sørensen

Publikation: Konferencebidrag uden forlag/tidsskriftPaperForskningpeer review

Resumé

We characterize when private equity funds have a competitive advantage over strategic buyers in acquiring a target firm. Taking advantage of the skill to mitigate informational frictions, private equity funds cut lossmaking projects, potentially merge the target with similarly restructured firms, and exercise growth options. Instead, a strategic buyer integrates with the target to obtain a better competitive position. The private equity fi rm is more likely to win the takeover competition when information is costlier, its required return premium is smaller, and the strategic buyer’s synergy gains are smaller. Such takeovers by private equity funds improve economic welfare.
OriginalsprogEngelsk
Publikationsdatojan. 2019
StatusUdgivet - jan. 2019
Begivenhed11th Annual Hedge Fund and Private Equity Research Conference - Paris, Frankrig
Varighed: 17. jan. 201918. jan. 2019

Konference

Konference11th Annual Hedge Fund and Private Equity Research Conference
LandFrankrig
ByParis
Periode17/01/201918/01/2019

Fingeraftryk

Buyers
Discount
Private equity
Synergy
Friction
Economic welfare
Exercise
Premium
Competitive advantage
Growth options

Citer dette

Flor, C. R., & Sørensen, P. N. (2019). Private Equity Acquisitions and Strategic Buyers: Information Discounts versus Synergies. Afhandling præsenteret på 11th Annual Hedge Fund and Private Equity Research Conference, Paris, Frankrig.
Flor, Christian Riis ; Sørensen, Peter Norman. / Private Equity Acquisitions and Strategic Buyers: Information Discounts versus Synergies. Afhandling præsenteret på 11th Annual Hedge Fund and Private Equity Research Conference, Paris, Frankrig.
@conference{6965cd23c374428587d26006321c406b,
title = "Private Equity Acquisitions and Strategic Buyers: Information Discounts versus Synergies",
abstract = "We characterize when private equity funds have a competitive advantage over strategic buyers in acquiring a target firm. Taking advantage of the skill to mitigate informational frictions, private equity funds cut lossmaking projects, potentially merge the target with similarly restructured firms, and exercise growth options. Instead, a strategic buyer integrates with the target to obtain a better competitive position. The private equity fi rm is more likely to win the takeover competition when information is costlier, its required return premium is smaller, and the strategic buyer’s synergy gains are smaller. Such takeovers by private equity funds improve economic welfare.",
keywords = "Corporate finance",
author = "Flor, {Christian Riis} and S{\o}rensen, {Peter Norman}",
year = "2019",
month = "1",
language = "English",
note = "null ; Conference date: 17-01-2019 Through 18-01-2019",

}

Flor, CR & Sørensen, PN 2019, 'Private Equity Acquisitions and Strategic Buyers: Information Discounts versus Synergies' Paper fremlagt ved 11th Annual Hedge Fund and Private Equity Research Conference, Paris, Frankrig, 17/01/2019 - 18/01/2019, .

Private Equity Acquisitions and Strategic Buyers: Information Discounts versus Synergies. / Flor, Christian Riis; Sørensen, Peter Norman.

2019. Afhandling præsenteret på 11th Annual Hedge Fund and Private Equity Research Conference, Paris, Frankrig.

Publikation: Konferencebidrag uden forlag/tidsskriftPaperForskningpeer review

TY - CONF

T1 - Private Equity Acquisitions and Strategic Buyers: Information Discounts versus Synergies

AU - Flor, Christian Riis

AU - Sørensen, Peter Norman

PY - 2019/1

Y1 - 2019/1

N2 - We characterize when private equity funds have a competitive advantage over strategic buyers in acquiring a target firm. Taking advantage of the skill to mitigate informational frictions, private equity funds cut lossmaking projects, potentially merge the target with similarly restructured firms, and exercise growth options. Instead, a strategic buyer integrates with the target to obtain a better competitive position. The private equity fi rm is more likely to win the takeover competition when information is costlier, its required return premium is smaller, and the strategic buyer’s synergy gains are smaller. Such takeovers by private equity funds improve economic welfare.

AB - We characterize when private equity funds have a competitive advantage over strategic buyers in acquiring a target firm. Taking advantage of the skill to mitigate informational frictions, private equity funds cut lossmaking projects, potentially merge the target with similarly restructured firms, and exercise growth options. Instead, a strategic buyer integrates with the target to obtain a better competitive position. The private equity fi rm is more likely to win the takeover competition when information is costlier, its required return premium is smaller, and the strategic buyer’s synergy gains are smaller. Such takeovers by private equity funds improve economic welfare.

KW - Corporate finance

M3 - Paper

ER -

Flor CR, Sørensen PN. Private Equity Acquisitions and Strategic Buyers: Information Discounts versus Synergies. 2019. Afhandling præsenteret på 11th Annual Hedge Fund and Private Equity Research Conference, Paris, Frankrig.