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. Using their skill to
mitigate informational frictions, private equity funds cut loss-making 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 fund is more likely to win the
takeover competition when its information skill is greater, 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
Publikationsdato2019
Antal sider44
StatusUdgivet - 2019
Begivenhed 27th Finance Forum - Madrid, Spanien
Varighed: 11. jul. 201912. jul. 2019

Konference

Konference 27th Finance Forum
LandSpanien
ByMadrid
Periode11/07/201912/07/2019

Fingeraftryk

Buyers
Discount
Private equity
Synergy
Economic welfare
Friction
Competitive advantage

Citer dette

Flor, C. R., & Sørensen, P. N. (2019). Private Equity Acquisitions and Strategic Buyers: Information Discounts versus Synergies. Paper præsenteret på 27th Finance Forum, Madrid, Spanien.
Flor, Christian Riis ; Sørensen, Peter Norman. / Private Equity Acquisitions and Strategic Buyers: Information Discounts versus Synergies. Paper præsenteret på 27th Finance Forum, Madrid, Spanien.44 s.
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Flor, CR & Sørensen, PN 2019, 'Private Equity Acquisitions and Strategic Buyers: Information Discounts versus Synergies', Paper fremlagt ved 27th Finance Forum, Madrid, Spanien, 11/07/2019 - 12/07/2019.

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

2019. Paper præsenteret på 27th Finance Forum, Madrid, Spanien.

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

Y1 - 2019

N2 - We characterize when private equity funds have a competitive advantage over strategic buyers in acquiring a target firm. Using their skill tomitigate informational frictions, private equity funds cut loss-making projects,potentially merge the target with similarly restructured firms, and exercisegrowth options. Instead, a strategic buyer integrates with the target to obtaina better competitive position. The private equity fund is more likely to win thetakeover competition when its information skill is greater, its required returnpremium is smaller, and the strategic buyer’s synergy gains are smaller. Suchtakeovers 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. Using their skill tomitigate informational frictions, private equity funds cut loss-making projects,potentially merge the target with similarly restructured firms, and exercisegrowth options. Instead, a strategic buyer integrates with the target to obtaina better competitive position. The private equity fund is more likely to win thetakeover competition when its information skill is greater, its required returnpremium is smaller, and the strategic buyer’s synergy gains are smaller. Suchtakeovers by private equity funds improve economic welfare.

KW - Information Frictions

KW - Posterior Beliefs

KW - Takeover Competition

KW - Welfare

M3 - Paper

ER -

Flor CR, Sørensen PN. Private Equity Acquisitions and Strategic Buyers: Information Discounts versus Synergies. 2019. Paper præsenteret på 27th Finance Forum, Madrid, Spanien.