Working Paper: NBER ID: w14189
Authors: Toby Stuart; Soojin Yim
Abstract: In this paper, we examine the propensity for U.S. public companies to become targets for private equity-backed, take-private transactions. We consider the characteristics of 483 private equity-backed deals in the 2000-2007 period relative to public companies, and find that, in addition to the financial drivers studied in previous works, board characteristics and director networks are also associated with deal generation. We find that a company that has a director who has had LBO experience through prior board service is ~40% more likely to receive a private equity offer, and that the strength of this effect varies with the influence of the director and the quality of the prior LBO experience. This effect is robust to the most likely alternative explanations and supports the idea that directors and social networks play an influential role in change-of-control transactions.
Keywords: No keywords provided
JEL Codes: G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Firms with directors who have had leveraged buyout (LBO) experience (G34) | Firms are more likely to receive private equity offers (G34) |
| The influence of the director and quality of prior LBO experience (G34) | Likelihood of receiving private equity offers (G24) |
| Interlocked directors (G34) | Lower costs of acquiring information pertinent to the take-private process (G34) |
| Board characteristics (G34) | Likelihood of becoming a target for private equity transactions (G34) |
| Directors and social networks (D85) | Influence on change-of-control transactions (G34) |