Private company acquisitions in the market for corporate control: A comparison between private equity and corporate acquirers

Abstract

This paper explores private company acquisitions, from 2000 to 2016, in the light of the market for corporate control. The two dominant acquirers – strategic acquirers (corporate firms) who seek long-term synergies, and financial ones (private equity firms) who acquire only to divest within a reasonable timeframe while harnessing returns – are bound by a target pool on a different playing field – private targets. Private companies are not affected by agency conflicts as their public counterparts and are generally less visible and more illiquid. This study examines acquirer choice, target characteristics, and deal characteristics, and its impact on deal value. Results indicated that different targets appealed to these acquirers, and PE acquirers valued targets higher than corporate ones. Further, a changing nature of acquisitions following the 2008 financial crisis was observed.