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Private equity bids in Australia: an exploratory study
Author(s) -
Chapple Larelle,
Clarkson Peter M.,
King Jesse J.
Publication year - 2010
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.2009.00323.x
Subject(s) - private equity firm , private equity , equity (law) , club deal , private equity fund , cash flow , sample (material) , free cash flow , business , private equity secondary market , private investment in public equity , equity risk , equity capital markets , large sample , finance , monetary economics , economics , chemistry , chromatography , political science , law , statistics , mathematics
In this study, we provide an insight into how private equity players choose their targets and the bid arrangements they prefer. We test our expectations of the unique features of private equity targets using a sample of 23 listed private equity target firms during 2001–2007. We find, relative to a benchmark sample of 81 corporate targets matched by year and industry, the private equity target firms to be larger, more profitable, use their assets more efficiently, more highly levered and have greater cash flow. Multivariate testing indicates that private equity targets have relatively greater financial slack, greater financial stability, greater free cash flow and lower measurable growth prospects. All conclusions are found to be robust to a control sample of 502 takeover bids during 2001–2007.