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Why the Credit Crunch Should
Help Corporate M&A
Credit market turmoil is
altering the global playing field in
buyouts and acquisitions, a field rife
with complaints in recent years about too much money chasing too few good
deals. |
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The
credit shortage puts pressure on pricing and transactional quality, while
also giving public companies a better shot at acquisitions that the more
aggressive private equity firms might previously have snatched away.
These are some practical implications of a paper presented at a recent
Wharton conference sponsored by the Weiss Center for
International Financial
Research whose theme was "A Global Perspective on Alternative Investments."
The paper, titled "Leverage and Pricing in Buyouts: An Empirical Analysis,"
documents the pricing anomalies that have characterized private equity
transactions in recent years. Chief among them: The greater the leverage
applied to a deal, the greater the price it has tended to command.
Acquisition by private equity firms has become increasingly common in recent
years in both the U.S. and Europe, with deals growing rapidly in both number
and size, notes Michael S. Weisbach, from the University of Illinois at
Urbana-Champaign. Weisbach presented the
paper on behalf of his co-authors,
Ulf Axelson, from the Stockholm School of Economics; Tim Jenkinson, Saïd
Business School, Oxford University; and Per Strömberg, Stockholm School of
Economics.
Read more from the source
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