Money chasing deals and chasing money - the impact of supply and demand on buyout performance
AbstractThis paper analyzes the impact of differences in supply of and demand for private equity financing on the performance of buyouts. Using a unique and proprietary sample of 684 buyout investments in North America and Europe, we show that buyout performance decreases when large volumes of private equity commitments are looking for suit-able acquisition targets and (b) increases when macroeconomic conditions are such that demand for private equity financing is high. These findings remain unchanged if we control for the idiosyncrasies of individual investment periods, transaction size, holding period and industry sector of individual investment and the vintage year, the size or the age of the investing private equity fund. Our results support the view that the market for buyout target companies is not necessarily efficient, but that instead acquisition prices (and thereby transaction performance) depend on the competition by a limited number of private equity fund managers for a limited number of attractive investment opportuni-ties.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HEC Paris in its series Les Cahiers de Recherche with number 851.
Length: 50 pages
Date of creation: 01 Jun 2006
Date of revision:
Private Equity funds; buyouts; performance; investment behavior;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-18 (All new papers)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sandra Dupouy).
If references are entirely missing, you can add them using this form.