Now showing 1 - 2 of 2
  • Publication
    Conflicts of Interest and the Role of Financial Advisors in M&A Transactions: Empirical Evidence from the Private Equity Industry
    (SoF-HSG, 2015) ;
    Wetzer, Thomas
    Financial advisors play an important role in M&A transactions. Private equity (PE) firms, in turn, are highly sought-after clients for financial advisors as they promise lucrative business due to their frequent engagements in acquisitions. We find that PE firms pay, on average, less for portfolio companies when their sell-side advisor has worked for the acquiring PE firm on the buy-side in past transactions. We refer to this as indirect relationships and argue that conflicts of interest be-tween financial advisors and their clients are the main driver for our results. Strategic acquirers do not benefit from these previous indirect relationships altogether.
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  • Publication
    Do Private Equity Funds Always Pay Less? A Synergy-Related Explanation Based on Add-on Acquisitions
    (SoF - HSG, 2015-10) ;
    Wetzer, Thomas
    We assess the pricing of transactions undertaken by private equity (PE) funds in comparison to the transactions of strategic acquirers and sellers and focus on synergy gains as an explanatory factor. Controlling for company and deal characteristics, we show that PE funds pay 20% less, on average, than strategic buyers for comparable target corporations (we refer to this as the PE discount). Supplementing the existing literature on the PE discount in M&A transactions, we show that in add-on transactions, this PE discount disappears. When PE funds benefit from synergies, they are willing to pay the same price level as strategic acquirers would do in comparable transactions. In line with this synergy-related explanation, we find that PE funds sell their portfolio companies to strategic acquirers at prices comparable to those of strategic sellers. In divestitures to other PE funds (secondary deals), the PE discount prevails.
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