Can Private Equity Funds Act as Strategic Buyers? Evidence from Buy-and-Build Strategies

Tinbergen Institute Discussion Paper 2020-041/IV

64 Pages Posted: 5 Aug 2020

See all articles by Dyaran Bansraj

Dyaran Bansraj

affiliation not provided to SSRN

Han Smit

Erasmus University Rotterdam (EUR)

Vadym Volosovych

Erasmus University Rotterdam (EUR)

Multiple version iconThere are 2 versions of this paper

Date Written: July 7, 2020

Abstract

By holding assets longer and increasingly focusing on growth strategies private equity firms enter the territory of strategic buyers. In one such strategy, a private equity firm buys a company and then builds on that “platform” through add-on acquisitions. We ask whether such serial (buy-and-build) acquisition strategies deliver operating synergies, as expected from strategic buyers, or rather are a form of “window-dressing.” We collect a sample of buy-and-build strategies from seven major European markets and find that the profitability of these strategies improves more than that of the comparable strategies, constructed by us from stand-alone companies. We analyze a number of operating outcomes across various strategy sub-types and confirm that these operational improvements are consistent with the synergy interpretation.

Keywords: Private Equity, Leveraged Buyouts, Buy-and-Build, Operating Performance, Synergies

JEL Classification: L2, G24, G34

Suggested Citation

Bansraj, Dyaran and Smit, Han and Volosovych, Vadym, Can Private Equity Funds Act as Strategic Buyers? Evidence from Buy-and-Build Strategies (July 7, 2020). Tinbergen Institute Discussion Paper 2020-041/IV, Available at SSRN: https://ssrn.com/abstract=3646984 or http://dx.doi.org/10.2139/ssrn.3646984

Dyaran Bansraj

affiliation not provided to SSRN

Han Smit (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Vadym Volosovych

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
Room E2-31
3000 DR Rotterdam, 3062PA
Netherlands
+31 10 408 1286 (Phone)
+31 10 408 9165 (Fax)

HOME PAGE: http://https://www.eur.nl/people/vadym-volosovych/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
108
Abstract Views
411
rank
98,825
PlumX Metrics