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The preferences of private equity investors in selecting target acquisitions: An international investigation

  • Sarah Osborne

    (UQ Business School, The University of Queensland, Brisbane, Australia)

  • Dean Katselas

    (School of Finance, Actuarial Studies, and Applied Statistics, The Australian National University, Canberra, Australia)

  • Larelle Chapple

    (School of Accountancy, Queensland University of Technology, Brisbane, Australia)

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    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 2000–2009, 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 ‘home bias’, implying that familiarity motivates target selection. Institutional factors remain largely insignificant across all tests.

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    Article provided by Australian School of Business in its journal Australian Journal of Management.

    Volume (Year): 37 (2012)
    Issue (Month): 3 (December)
    Pages: 361-389

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    Handle: RePEc:sae:ausman:v:37:y:2012:i:3:p:361-389
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