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Essays on deal pricing and specialization in the private equity industry

  • This dissertation consists of three essays, which explore the pricing of buy-and build (B&B) and cross-border deals as well as the determinants of PE sponsors iesting outside their industry of competitive advantage and the respective effects on portfolio firms’ operating performance. Chapter 2 presents an essay on the pricing of B&B deals and addresses the question whether PE sponsors can price in expected synergies when following a B&B strategy. The findings indicate that PE sponsors pay a significant price premium when the portfolio firm conducts add-on acquisitions within the same industry within two years after the initial buyout. Consistent with bargaining power theory, the effect strengthens when the portfolio firm has acquisition experience, and when the PE sponsor faces pressure to iest because of unspent fund capital or deal competition. Chapter 3 presents an essay on the pricing of cross-border deals and iestigates whether PE sponsors suffer from lower negotiation power vis-à-vis sellers due to a lack of country-specific expertise and higher information asymmetries when acquiring foreign targets. The results presented in this paper document that PE sponsors indeed pay a significant price premium in cross-border deals compared to domestic deals. The iestigation of channels indicates that the cross-border price premium is driven by information asymmetries: factors which mitigate information asymmetries lower the cross-border price premium. Chapter 4 closes with an essay on the determinants of PE sponsors leaving their industry of competitive advantage and the implications on portfolio firm level. This paper shows that PE sponsors mainly iest outside their competitive advantage due to increased competitive pressure in their industries of competitive advantage. Portfolio firms, which are backed by a PE sponsor that iests outside its industry of relative competitive advantage, exhibit lower operating performance growth in the years following the buyout. Last but not least, this essay identifies factors, which mitigate PE sponsors’ lack of industry-specific knowledge and hence improve portfolio firms’ operating performance. _x000D_ A copy of this doctoral thesis can be obtained on account from the HHL Library. Please send your request indicating the delivery address to: library(at)hhl.de._x000D_ For packaging and postage we request an advance payment of EUR 5.00 for deliveries within Germany or EUR 20.00 for international orders.

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Document Type:Doctoral Thesis
Author:Lukas Otto Janssen
Chairs and Professorships:Chair of Financial Management
Year of Completion:2016
Leipzig: HHL Leipzig Graduate School of Management, 2019 Leipzig, HHL Leipzig Graduate School of Management, Dissertation, 2019