Do private equity consortiums facilitate collusion in takeover bidding?

Boone, Audra L.; Mulherin, J. Harold

doi:10.1016/j.jcorpfin.2011.08.007

Cited by 68 publications

(16 citation statements)

References 56 publications

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“…29 29 Officer et al (2009) find that target shareholders receive less in club deals than in sole‐sponsored LBOs. Using a different sample, Boone and Mulherin (2009) fail to find any negative effect of club deals on either takeover competition or target returns. …”

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confidence: 76%

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Do Buyouts (Still) Create Value?

Guo¹,

Hotchkiss²,

Song³

2011

The Journal of Finance

357

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We examine how leveraged buyouts from the most recent wave of public to private transactions created value. Buyouts completed between 1990 and 2006 are more conservatively priced and less levered than their predecessors from the 1980s. For deals with post-buyout data available, median market-and risk-adjusted returns to pre-(post-) buyout capital invested are 72.5% (40.9%). In contrast, gains in operating performance are either comparable to or slightly exceed those observed for benchmark firms. Increases in industry valuation multiples and realized tax benefits from increasing leverage, while private, are each economically as important as operating gains in explaining realized returns.

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confidence: 76%

“…7 7 See Officer, Ozbas, and Sensoy (2009) and Boone and Mulherin (2009). See also: “Private Equity Slugfest: Investors and regulators fear there isn't enough competition among private equity firms for deals, Business Week , February 13, 2007. …”

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confidence: 99%

Do Buyouts (Still) Create Value?

Guo¹,

Hotchkiss²,

Song³

2011

The Journal of Finance

357

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“…The results suggest that buyers of stapled finance transactions perform worse than non‐stapled finance transactions, ceteris paribus . Consistent with the theoretical prediction of Povel and Singh, Boone and Mulherin (2009) find that staple financing is associated with increased competition, i.e., a greater number of firms making non‐binding and binding private offers for the target firm.…”

Section: Performance: Risk‐adjusted Returns Persistence and Sourmentioning

confidence: 98%

Venture Capital and Other Private Equity: a Survey

Metrick¹,

Yasuda²

2011

European Financial Management

142

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Abstract. We review the theory and evidence on venture capital (VC) and other private equity: why professional private equity exists, what private equity managers do with their portfolio companies, what returns they earn, who earns more and why, what determines the design of contracts signed between (i) private equity managers and their portfolio companies and (ii) private equity managers and their investors (limited partners), and how/whether these contractual designs affect outcomes. Findings highlight the importance of private ownership, and information asymmetry and illiquidity associated with it, as a key explanatory factor of what makes private equity different from other asset classes.

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“…With the exception of Boone and Mulherin (2008), stapled finance has not been previously studied in academic work, so there are no well‐developed alternative explanations for the popularity of this type of M&A financing. However, practitioners and journalists have described some of the benefits that sellers enjoy when arranging stapled finance.…”

Section: Alternative Explanationsmentioning

confidence: 99%

“…Being a fairly recent creation, stapled finance has not yet entered the academic mainstream. An exception is Boone and Mulherin (2008), who find that M&A contests with stapled finance offers are more competitive. The role of debt in takeover settings has been analyzed previously; see, for example, Jensen (1986), Harris and Raviv (1988), Stulz (1988), Israel (1991, 1992), Clayton and Ravid (2002), and Müller and Panunzi (2004).…”

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confidence: 99%

Stapled Finance

Povel¹,

Singh

2010

The Journal of Finance

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"Stapled finance" is a loan commitment arranged by a seller in an M&A setting. Whoever wins the bidding contest has the option (not the obligation) to accept this loan commitment. We show that stapled finance increases bidding competition by subsidizing weak bidders, who raise their bids and thereby the price that strong bidders (who are more likely to win) must pay. The lender expects not to break even and must be compensated for offering the loan. This reduces but does not eliminate the seller's benefit. It also implies that stapled finance loans will show poorer performance than other buyout loans. Copyright (c) 2010 the American Finance Association.

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Do private equity consortiums facilitate collusion in takeover bidding?

Cited by 68 publications

References 56 publications

Do Buyouts (Still) Create Value?

Do Buyouts (Still) Create Value?

Venture Capital and Other Private Equity: a Survey

Stapled Finance

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