Working Paper: NBER ID: w27435
Authors: Cesare Fracassi; Alessandro Previtero; Albert W. Sheen
Abstract: We investigate the effects of private equity on product markets using price and sales data for an extensive number of consumer products. Following a buyout, target firms increase sales 50% more than matched control firms. Price increases—roughly 1% on existing products—do not drive this growth. The launch of new products and geographic expansion do. Competitors lose shelf space and marginally raise prices. Results for public vs. private targets, during and after the financial crisis, and in industries that vary in structure suggest private equity tailors strategies to the environment, eases financial constraints, and provides expertise to manage growth.
Keywords: Private Equity; Consumer Products; Sales Growth; Pricing Dynamics; Market Expansion
JEL Codes: G24; L11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Private Equity Buyout (G34) | Sales Increase (O42) |
| Private Equity Buyout (G34) | Price Increase (D49) |
| Sales Increase (O42) | New Products Launch (O36) |
| Sales Increase (O42) | Geographic Expansion (R12) |
| Private Equity Buyout (G34) | Competitors Price Increase (L11) |
| Public Targets (L17) | Price Increase (D49) |
| Public Targets (L17) | Sales Decrease (L81) |
| Private Targets (L29) | Growth through Innovation and Expansion (O00) |