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Sources of value gains in minority equity investments by private equity funds: Evidence from block share acquisitions

Listed author(s):
  • Chen, Guojun
  • Kang, Jun-Koo
  • Kim, Jin-Mo
  • Na, Hyun Seung
Registered author(s):

    Using block share acquisitions made by private equity (PE) funds, we examine the sources of value gains in PE minority equity investments. We find that compared with non-PE acquirers, PE acquirers are more likely to place representatives with finance experience or those with experience in the target's industry on the target's board when the need for target oversight and/or advice is higher. The targets in PE acquisitions, particularly poorly performing targets, targets with high R&D intensity, and targets with PE-appointed directors who have experience in the target's industry, realize both higher announcement returns and better post-acquisition operating performance than do targets in non-PE acquisitions. These findings suggest that the governance and operational engineering that PE acquirers apply to their targets constitutes important sources of value creation in PE minority equity investments.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0929119914001084
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    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 29 (2014)
    Issue (Month): C ()
    Pages: 449-474

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    Handle: RePEc:eee:corfin:v:29:y:2014:i:c:p:449-474
    DOI: 10.1016/j.jcorpfin.2014.09.003
    Contact details of provider: Web page: http://www.elsevier.com/locate/jcorpfin

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