Selling Private Equity Fees

72 Pages Posted: 1 Aug 2022 Last revised: 21 Nov 2022

See all articles by Minmo Gahng

Minmo Gahng

University of Florida - Department of Finance, Insurance and Real Estate

Blake Jackson

University of Florida - Department of Finance, Insurance and Real Estate

Date Written: July 25, 2022

Abstract

We examine private equity (PE) firms’ minority stake sales and the impact of these sales on agency frictions with fund investors. PE firms that have sold minority stakes – primarily to other PE firms – oversee 27% of PE Assets Under Management in 2020. PE firms with strong fundraising and investment records tend to sell stakes. Sellers subsequently experience substantial increases in capital raised (41%) and income (55%). We find no evidence of deteriorating fund performance. Sellers invest more capital in their funds, increase employment, and make investor-friendly distributions. Our results suggest that the reduced “skin-in-the-game” from stake sales does not exacerbate agency frictions between sellers and their fund investors.

Keywords: Private Equity, General Partner, Fees, Fund Managers, Agency Conflicts, External Financing, Minority Acquisition

JEL Classification: G24, G30, G34

Suggested Citation

Gahng, Minmo and Jackson, Blake, Selling Private Equity Fees (July 25, 2022). Available at SSRN: https://ssrn.com/abstract=4171363 or http://dx.doi.org/10.2139/ssrn.4171363

Minmo Gahng

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

HOME PAGE: http://minmogahng.com

Blake Jackson (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

HOME PAGE: http://sites.google.com/view/blakejackson/home

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