Board Interlocks and the Propensity to be Targeted in Private Equity Transactions
AbstractIn this paper, we examine the propensity for U.S. public companies to become targets for private equity-backed, take-private transactions. We consider the characteristics of 483 private equity-backed deals in the 2000-2007 period relative to public companies, and find that, in addition to the financial drivers studied in previous works, board characteristics and director networks are also associated with deal generation. We find that a company that has a director who has had LBO experience through prior board service is ~40% more likely to receive a private equity offer, and that the strength of this effect varies with the influence of the director and the quality of the prior LBO experience. This effect is robust to the most likely alternative explanations and supports the idea that directors and social networks play an influential role in change-of-control transactions.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14189.
Date of creation: Jul 2008
Date of revision:
Publication status: published as Journal of Financial Economics Volume 97, Issue 1, July 2010, Pages 174–189
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Find related papers by JEL classification:
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-30 (All new papers)
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