Consortium Deals and the Market for Lbos

Abstract

This study examines the effect of private equity consortiums on the market for leveraged buyouts. We address this issue by constructing a model of returns to target shareholders surrounding the buyout announcement. Our results suggest that target pre-announcement (run-up) returns are higher for consortium deals when compared with deals proposed by sole buyers. However, target announcement abnormal returns for consortium deals are significantly lower than those for sole sponsors, and this pattern persists until the deal is consummated. Additionally, higher network density results in higher target pre-announcement returns and a similar result is obtained for network centrality, which captures ..