The Impact of Competition on the Selection and Valuation of Deals by Private Equity Firms

Frontiers of Entrepreneurship Research, 2006

Babson College Entrepreneurship Research Conference (BCERC) 2006

13 Pages Posted: 11 Feb 2009 Last revised: 28 May 2009

See all articles by Miguel Meuleman

Miguel Meuleman

Vlerick Business School; University of Nottingham

Date Written: February 2, 2009

Abstract

An important but largely neglected question in the literature on private equity investing is how the competitive environment shapes the behavior of private equity firms. In this study, we first explore whether competition has an impact on the role of previous industry knowledge for the generation of investment opportunities. Second, we study the impact of competition on the valuation of investment targets. Our hypotheses are tested on a unique hand-collected dataset of the UK buyout market. Using different measures of competition, our results show that increased competition has two opposing effects on the role of previous industry knowledge for the selection of investment opportunities. Further, increased competition leads to higher valuations of target firms.

Keywords: Entrepreneurship

JEL Classification: M13

Suggested Citation

Meuleman, Miguel, The Impact of Competition on the Selection and Valuation of Deals by Private Equity Firms (February 2, 2009). Frontiers of Entrepreneurship Research, 2006; Babson College Entrepreneurship Research Conference (BCERC) 2006. Available at SSRN: https://ssrn.com/abstract=1336713 or http://dx.doi.org/10.2139/ssrn.1336713

Miguel Meuleman (Contact Author)

Vlerick Business School ( email )

Reep 1
Gent, 9000
Belgium
0032(0)92109770 (Phone)
0032(0)92109790 (Fax)

University of Nottingham

University Park
Nottingham, NG8 1BB
United Kingdom

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