Private Equity Fundraising and Firm Specialization
42 Pages Posted: 9 Oct 2012 Last revised: 5 Jun 2015
Date Written: May 10, 2015
Using a firm-level perspective, this study examines the effect of specialization on the fundraising activities of private equity (PE) firms. In the empirical analysis, we consider three dimensions of specialization: stage, industry and geographic location. Using a large sample of U.S. PE firms, we find that firms specialized across all dimensions raise new funds more quickly than generalists only if the type of the new fund coincides with the current area of the firm’s expertise, suggesting that expertise cannot be easily extended to other areas. We further explore what explains the observed link and provide evidence supporting the idea that specialization accelerates future fundraising through increased value-adding to the current portfolio of PE firms. Further analyses indicate that PE firms willing to increase future capital commitments may consider specializing across industries and stages since they are positively related to the size of follow-up funds.
Keywords: Private equity, specialization, fundraising, competing risks model
JEL Classification: G2, G24, G3
Suggested Citation: Suggested Citation