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Mergers and Acquisitions with Private Equity Intermediation

Author

Listed:
  • Swaminathan Balasubramaniam

    (Washington University in St. Louis)

  • Armando Gomes

    (Washington University in St. Louis)

  • SangMok Lee

    (Washington University in St. Louis)

Abstract

We build a search model of mergers and acquisitions (M&A) with private equity (PE) intermediation. The model comprises three concurrently operating markets: corporate-corporate, corporate-PE, and inter-PE secondary buyout (SBO). PE intermediaries search for investment opportunities, hold an inventory of rms, add operational value through better governance, and exit by selling their entire portfolio. PE funds can enhance M&A market efficiency by alleviating search frictions and providing greater liquidity through SBOs, resulting in complementarities among PE funds. A calibration result shows PE funds' values are higher by 26% due to SBOs and increasing in the number of funds.

Suggested Citation

  • Swaminathan Balasubramaniam & Armando Gomes & SangMok Lee, 2019. "Mergers and Acquisitions with Private Equity Intermediation," 2019 Meeting Papers 1121, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:1121
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    References listed on IDEAS

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