The preferences of private equity investors in selecting target acquisitions: an international investigation

This study investigates the characteristics and attributes that private equity investors prefer when selecting target acquisitions. These characteristics are examined against a matched sample of firms subject to corporate acquisitions via tender/merger offer during 2000–2009, across seven countries:...

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Bibliographic Details
Published inAustralian journal of management Vol. 37; no. 3; pp. 361 - 389
Main Authors Osborne, Sarah, Katselas, Dean, Chapple, Larelle
Format Journal Article
LanguageEnglish
Published London, England SAGE Publications 01.12.2012
Sage Publications Ltd
Subjects
Decision making
Equity
Investment
Manycountries
Mergers
Preferences
Private equity
Risk
Stock volatility
Studies
Target company
Tender offers
Volatility
Acquisition techniques
legal origin
economic cycles
regulatory environment
equity home bias
private equity
tender offers
mergers
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Summary:This study investigates the characteristics and attributes that private equity investors prefer when selecting target acquisitions. These characteristics are examined against a matched sample of firms subject to corporate acquisitions via tender/merger offer during 2000–2009, across seven countries: Australia, Canada, the United Kingdom, the USA, France, Germany and Sweden. We show that firm-specific characteristics are more influential in target selection than external or institutional variables. In particular, private equity targets exhibit lower stock volatility and long-term growth prospects, are larger, and have greater abnormal operating income relative to tender/merger offer target firms. Further, private equity bidders exhibit ‘home bias’, implying that familiarity motivates target selection. Institutional factors remain largely insignificant across all tests.
Bibliography:Australian Journal of Management, v.37, no.3, Dec 2012: (361)-389
ISSN:0312-8962
1327-2020
DOI:10.1177/0312896212440269