Do acquisitions by private equity funds create value? evidence from full and partial acquisitions in Korea

다국어 초록 (Multilingual Abstract)

This research investigates the performance and sources of value gains of acquisitions by private equity funds (PEFs) using a sample of Korean listed firms acquired from 2007 to 2017. Classifying the acquisitions in which acquirers obtain the largest target ownership as full acquisitions and the transactions in which acquirers purchase at least 5% of target shares without becoming its largest shareholder as partial acquisitions, I find positive stock market reactions to both types of acquisitions by PEFs. I also find operating performance improvement following full acquisitions by PEFs. Moreover, PEF targets that appoint new outside directors or those with finance experiences attain improved operating performance after full acquisitions. These results suggest that acquisitions by PEFs increase the wealth of shareholders mainly by governance and operational engineering and this value enhancement is more evident in full acquisitions than in partial acquisitions.

목차 (Table of Contents)

• 1. Introduction 1
• 2. Literature Review 4
• 2.1. Performance of target companies 4
• 2.2. Sources of value gains in acquisitions by PEFs 6
• 2.3. Blocks share acquisitions by PEFs 7
• 3. Hypotheses Development 8
• 3.1. Performance 8
• 3.2. Sources of value gains 9
• 4. Data and Methodology 12
• 4.1. Sample and data 12
• 4.2. Measuring targets’ acquisition announcement returns, post-acquisition performance and post-acquisition policy changes by PEF engineering 14
• 4.3. Models 16
• 5. Characteristics of Target Firms and Deals 17
• 5.1. Summary statistics and univariate tests 17
• 5.2. Probit analysis of becoming a target 19
• 6. Empirical Results of Partial Acquisitions 19
• 6.1. Announcement effect of partial acquisitions 19
• 6.2. Long-term performance of targets 20
• 6.3. Effects of PEF engineering 21
• 7. Empirical Results of Full Acquisitions 22
• 7.1. Announcement effect of full acquisitions 23
• 7.2. Long-term performance of targets 23
• 7.3. Effects of PEF engineering 23
• 8. Additional Tests 25
• 9. Conclusion 25
• Appendix. Definition of variables 47
• References 49