Industry Concentration, Syndication Networks and Competition in the UK Private Equity Market for Management Buy-Outs

34 Pages Posted: 31 Jan 2007

See all articles by Mike Wright

Mike Wright

Nottingham University Business School

Miguel Meuleman

Vlerick Business School; University of Nottingham

Date Written: December 2006

Abstract

A largely neglected question in the literature on private equity investing is how the competitive environment influences the activities of private equity firms. In this study, we examine the impact of market concentration and interfirm networking through syndication on the price private equity firms pay to acquire investment targets. As such, we provide insights on the sources of returns in the private equity market. We test our hypotheses by studying the price private equity firms pay to acquire buyout targets using a unique hand-collected dataset of UK buyout transactions in the period 1993 to 2002. Our results show that lower levels of market concentration in the market for private equity increase the price private equity investors pay to acquire target firms. Our results did not indicate a consistent effect from the extent of interfirm networking through syndication. Implications for theory and practice are suggested.

Keywords: private equity, buyouts, valuation, competition, syndication

JEL Classification: G24, L13, L14, L84

Suggested Citation

Wright, Mike and Meuleman, Miguel, Industry Concentration, Syndication Networks and Competition in the UK Private Equity Market for Management Buy-Outs (December 2006). Available at SSRN: https://ssrn.com/abstract=960420 or http://dx.doi.org/10.2139/ssrn.960420

Mike Wright (Contact Author)

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5257 (Phone)
+44 115 951 5204 (Fax)

Miguel Meuleman

Vlerick Business School ( email )

Reep 1
Gent, 9000
Belgium
0032(0)92109770 (Phone)
0032(0)92109790 (Fax)

University of Nottingham

University Park
Nottingham, NG8 1BB
United Kingdom

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