We study companies' tax avoidance behavior after being acquired in a private equity transaction. Using firm-level data from Europe, we analyze target firms' tax payments after the acquisition compared to a carefully selected control group in a matched-sample difference-in-differences setting. We find that target companies' effective tax rate decreases by 16.14% relative to the unconditional mean. This finding is in line with the hypothesis that private equity investors create shareholder value by extracting money from the government. While our evidence suggests that target firms engage more heavily in profit shifting, we do not find direct evidence in support of a tax-motivated leverage channel. We further show that those target firms that become more tax efficient experience significantly lower asset and employment growth than target firms with no or moderate tax savings after the buyout. This finding indicates that tax savings are not used to finance investment but are directly transferred to shareholders.