Barbarians at the Store? Private Equity, Products, and Consumers

We investigate the effects of private equity on product markets using price and sales data for an extensive number of consumer products. Following a buyout, target firms increase sales 50% more than matched control firms. Price increases—roughly 1% on existing products—do not drive this growth. The...

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Bibliographic Details
Published in:NBER Working Paper Series 2020-06
Main Authors: Fracassi, Cesare, Previtero, Alessandro, Sheen, Albert W
Format: Article
Language:English
Subjects:
Economic theory
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Summary:We investigate the effects of private equity on product markets using price and sales data for an extensive number of consumer products. Following a buyout, target firms increase sales 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 lose shelf space and marginally raise prices. Results for public vs. private targets, during and after the financial crisis, and in industries that vary in structure suggest private equity tailors strategies to the environment, eases financial constraints, and provides expertise to manage growth.
ISSN:0898-2937
DOI:10.3386/w27435