The Effect of U.S. Public-to-Private Leveraged Buyouts on Innovation

38 Pages Posted: 13 May 2019 Last revised: 12 Jan 2021

See all articles by Brian Ayash

Brian Ayash

California State Polytechnic University, San Luis Obispo - Finance Area

Edward J. Egan

Independent

Date Written: April 12, 2019

Abstract

With a large sample of public-to-private leveraged buyouts from 1980 to 2006, we find that LBO targets are equally likely to hold patents as other publicly-traded firms. Using a difference-in-differences approach, we find that LBOs reduce patent flows by one third. This reduction results from a 23% decline in new grants and 7% fewer purchases. Around one fifth of patent-holding LBO targets sell patents immediately after their buyout, liquidating an average of 45% of their portfolio. After an LBO, patents are granted at a reduced rate, receive the same level of citations, and make 16% more citations.

Keywords: Leverage buyout, private equity, innovation, patents, R&D

JEL Classification: G24, G34, G38, O32, O34, D22

Suggested Citation

Ayash, Brian and Egan, Edward, The Effect of U.S. Public-to-Private Leveraged Buyouts on Innovation (April 12, 2019). Georgetown McDonough School of Business Research Paper No. 3371235, Available at SSRN: https://ssrn.com/abstract=3371235 or http://dx.doi.org/10.2139/ssrn.3371235

Brian Ayash (Contact Author)

California State Polytechnic University, San Luis Obispo - Finance Area ( email )

College of Business
San Luis Obispo, CA 93407
United States

Edward Egan

Independent ( email )

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