Buying to Sell: Private Equity Buyouts and Industrial Restructuring

Arbeitspapier

We show how temporary ownership by private equity firms affects industry structure, competition and welfare. Temporary ownership leads to strong investment incentives because equilibrium resale prices are determined by buyers incentives to block rivals from obtaining assets. These incentives benefit consumers, but harm rivals in the industry. Evaluating optimal antitrust policy, we underscore that an active private equity market can aid antitrust authorities by triggering welfare-enhancing mergers and by preventing concentration in the industry. By spreading the cost of specializing in restructuring over multiple markets, private equity firms have stronger incentives than incumbents to invest in acquiring specialized restructuring skills.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4338

Classification and Topics

• Classification: Wirtschaft ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance ; Oligopoly and Other Imperfect Markets ; Firm Organization and Market Structure ; Antitrust Issues and Policies: General
• Subject: antitrust ; competition policy ; leveraged buyouts ; mergers and acquisitions ; private equity ; temporary ownership

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Norbäck, Pehr-Johan ; Persson, Lars ; Tåg, Joacim
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/79652
• Last update: 10.03.2025, 11:45 AM CET