Barbarians at the Store? Private Equity, Products, and Consumers
50 Pages Posted: 6 Feb 2017 Last revised: 17 Jul 2018
Date Written: June 19, 2018
We investigate the effects of private equity on product markets, using detailed price and sales data for an extensive number of consumer products. In the years following a buyout, target firms increase sales by 53% compared to 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 lose shelf space and marginally raise prices themselves. These growth results hold in particular for private firms, while public targets in fact contract. Private equity thus appears to ease financial constraints, provide expertise to manage growth, and reduce investment where needed. Our findings question the common view that private equity substantially increases prices, harming consumers.
Keywords: Private Equity, Product Markets, Pricing Strategy, Consumer Products
JEL Classification: G24, L11
Suggested Citation: Suggested Citation