The preferences of private equity investors in selecting target acquisitions: An international investigation
This study investigates the characteristics and attributes that private equity investors prefer when selecting target acquisitions. These characteristics are examined against a matched sample of firms subject to corporate acquisitions via tender/merger offer during 2000â€“2009, across seven countries: Australia, Canada, the United Kingdom, the USA, France, Germany and Sweden. We show that firm-specific characteristics are more influential in target selection than external or institutional variables. In particular, private equity targets exhibit lower stock volatility and long-term growth prospects, are larger, and have greater abnormal operating income relative to tender/merger offer target firms. Further, private equity bidders exhibit â€˜home biasâ€™, implying that familiarity motivates target selection. Institutional factors remain largely insignificant across all tests.
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