Barbarians at the Store? Private Equity, Products, and Consumers

82 Pages Posted: 6 Feb 2017 Last revised: 22 Jun 2021

See all articles by Cesare Fracassi

Cesare Fracassi

University of Texas at Austin

Alessandro Previtero

Indiana University - Kelley School of Business - Department of Finance; National Bureau of Economic Research (NBER)

Albert Sheen

University of Oregon - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: June 16, 2021

Abstract

We investigate the effects of private equity firms on product markets using price and sales data for an extensive number of consumer products. Following a private equity deal, target firms increase retail sales of their products 50% more than matched control firms. Price increases---roughly 1% on existing products---do not drive this growth. The launch of new products and geographic expansion do. Competitors reduce their product offerings and marginally raise prices. Cross-sectional results on target firms, PE firms, the economic environment, and product categories suggest that private equity generates growth by easing financial constraints and providing managerial expertise.

Keywords: Private Equity, Product Markets, Pricing Strategy, Consumer Products

JEL Classification: G24, L11

Suggested Citation

Fracassi, Cesare and Previtero, Alessandro and Sheen, Albert, Barbarians at the Store? Private Equity, Products, and Consumers (June 16, 2021). Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2911387 or http://dx.doi.org/10.2139/ssrn.2911387

Cesare Fracassi (Contact Author)

University of Texas at Austin ( email )

McCombs School of Business
2110 Speedway Stop B6600
Austin, TX 78712-1276
United States
512-232-6843 (Phone)

HOME PAGE: http://https://faculty.mccombs.utexas.edu/cesare.fracassi/

Alessandro Previtero

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
+1 (512) 581-5420 (Phone)

HOME PAGE: http://aleprevitero.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Albert Sheen

University of Oregon - Department of Finance ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

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