Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2020-07-09
Number: 20-041/IV
Author-Name: Dyaran Bansraj
Author-Workplace-Name: Erasmus University Rotterdam
Author-Name: Han Smit
Author-Workplace-Name: Erasmus University Rotterdam
Author-Name: Vadym Volosovych
Author-Workplace-Name: Erasmus University Rotterdam
Title: Can Private Equity Funds Act as Strategic Buyers? Evidence from Buy-and-Build Strategies
Abstract: By holding assets longer and increasingly focusing on growth strategies private equity firms enter the territory of strategic buyers. In one such strategy, a private equity firm buys a company and then builds on that “platform” through add-on acquisitions. We ask whether such serial (buy-and-build) acquisition strategies deliver operating synergies, as expected from strategic buyers, or rather are a form of “window-dressing.” We collect a sample of buy-and-build strategies from seven major European markets and find that the profitability of these strategies improves more than that of the comparable strategies, constructed by us from stand-alone companies. We analyze a number of operating outcomes across various strategy sub-types and confirm that these operational improvements are consistent with the synergy interpretation.
Classification-JEL: L2, G24, G34
Keywords: Private Equity, Leveraged Buyouts, Buy-and-Build, Operating Performance, Synergies
File-URL: https://papers.tinbergen.nl/20041.pdf
File-Format: application/pdf
File-Size: 891541 bytes
Handle: RePEc:tin:wpaper:20200041