 Do Private Equity Funds Always Pay Less? A Synergy-Related Explanation Based on Add-on AcquisitionsStefan Morkoetter and Thomas Wetzer () No 1522, Working Papers on Finance from University of St. Gallen, School of Finance Abstract: We assess the pricing of transactions undertaken by private equity (PE) funds in comparison to the transactions of strategic acquirers and sellers and focus on synergy gains as an explanatory factor. Controlling for company and deal characteristics, we show that PE funds pay 20% less, on average, than strategic buyers for comparable target corporations (we refer to this as the PE discount). Supplementing the existing literature on the PE discount in M&A transactions, we show that in add-on transactions, this PE discount disappears. When PE funds benefit from synergies, they are willing to pay the same price level as strategic acquirers would do in comparable transactions. In line with this synergy-related explanation, we find that PE funds sell their portfolio companies to strategic acquirers at prices comparable to those of strategic sellers. In divestitures to other PE funds (secondary deals), the PE discount prevails. Keywords: Private Equity; Corporate Finance; Mergers and Acquisitions; Takeover Premiums; Synergies; Add-on Acquisitions (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:usg:sfwpfi:2015:22 Access Statistics for this paper More papers in Working Papers on Finance from University of St. Gallen, School of Finance Contact information at EDIRC. |
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