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Do private acquirers pay less compared to public acquirers?

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  • Du, Ding
  • Gerety, Mason

Abstract

Because going public significantly changes bidder managerial ownership (a proxy for agency problems) but not the corporate control market in which private equity (PE) firms operate, if agency problems causally drive takeover premiums as hypothesized by Bargeron et al. (2008), deal premiums should significantly increase after PE acquirers go public. We test this prediction, and find that deal premiums are not significantly higher after PE acquirers go public. Our finding thus is inconsistent with the agency-problem hypothesis.

Suggested Citation

  • Du, Ding & Gerety, Mason, 2018. "Do private acquirers pay less compared to public acquirers?," Economics Letters, Elsevier, vol. 164(C), pages 35-37.
    • Handle: RePEc:eee:ecolet:v:164:y:2018:i:c:p:35-37
    DOI: 10.1016/j.econlet.2017.12.036
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    References listed on IDEAS

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    1. Bargeron, Leonce L. & Schlingemann, Frederik P. & Stulz, René M. & Zutter, Chad J., 2008. "Why do private acquirers pay so little compared to public acquirers?," Journal of Financial Economics, Elsevier, vol. 89(3), pages 375-390, September.
    2. J. Mulherin & Kiplan Womack, 2015. "Competition, Auctions & Negotiations in REIT Takeovers," The Journal of Real Estate Finance and Economics, Springer, vol. 50(2), pages 151-180, February.
    3. Audra L. Boone & J. Harold Mulherin, 2007. "How Are Firms Sold?," Journal of Finance, American Finance Association, vol. 62(2), pages 847-875, April.
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    Cited by:

    1. Tunyi, Abongeh A. & Machokoto, Michael, 2021. "The impact of weather-induced moods on M&A performance," Economics Letters, Elsevier, vol. 207(C).

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    More about this item

    Keywords

    Private equity acquisitions; Takeover premium; Merger & acquisition;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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