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

ABSTRACT 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...

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Bibliographic Details
Published in:The Journal of finance (New York) 2022-06, Vol.77 (3), p.1439-1488
Main Authors: FRACASSI, CESARE, PREVITERO, ALESSANDRO, SHEEN, ALBERT
Format: Article
Language:English
Subjects:
Companies
Competitors
Consumer goods
Equity
Prices
Private equity
Product introduction
Sales
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Summary:ABSTRACT 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.
ISSN:0022-1082
1540-6261
DOI:10.1111/jofi.13134