Your Former Employees Matter: Private Equity Firms and Their Financial Advisors

Abstract:     
This paper shows that former investment bankers become important clients for their previous employers and also provide access to profitable business opportunities to their new private equity employers through their previous employment networks. I observe 1,326 individuals directly involved in 1,285 transactions, of whom a large majority have changed their occupation from financial advisor to private equity professional. The social networks arising from these labor market movements affect private equity firms’ choices of financial advisors, as well as the sourcing, pricing, and performance of deals.

Keywords: Social networks, private equity, acquisitions

JEL Classification: G10, G24, G34

Accepted Paper Series