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Barbarians at the Store? Private Equity, Products, and Consumers
Author(s) -
FRACASSI CESARE,
PREVITERO ALESSANDRO,
SHEEN ALBERT
Publication year - 2022
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.13134
Subject(s) - competitor analysis , private equity , business , club deal , private equity secondary market , private equity firm , equity (law) , equity capital markets , product (mathematics) , private investment in public equity , private equity fund , monetary economics , equity risk , finance , industrial organization , commerce , economics , marketing , geometry , mathematics , political science , law
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, private equity firms, the economic environment, and product categories suggest that private equity generates growth by easing financial constraints and providing managerial expertise.