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Shaking hands with common foes : Clique premium and information diffusion in private equity networks
Giovannetti, Andrea Pipic, Denis
Giovannetti, Andrea
Pipic, Denis
Author
Abstract
The fastest growing segment of private equity deals is secondary buyouts (SBOs) sales from one private equity (PE) firm to another. We operationalize a novel FactSet database to map the network structures of secondary buyouts between PE firms. We offer three contributions. First, after controlling for economic covariates, we find that PE firms are almost three times more likely to transact if they share a partner, that is both firms belong to the same clique. Second, we find that the profitability of such transactions is unambiguously higher relative to the baseline only if these are the result of repeated interaction between firms belonging to the same cliques. In other words, a clique premium exists under repeated interaction. Third, we provide evidence that the economic incentive at the core of clique premium may be related to access to information. In fact, we show that information related to transactions diffuses through the network, with 23% and 16% of the information going one and two steps beyond transacting parties, respectively.
Keywords
Private equity, Secondary buyouts, Networks, Information diffusion, ERGMs, Network formation, Financial networks, SBOs, Clique premium, Contagion
Date
2023
Type
Journal article
Journal
Book
Volume
86
Issue
Page Range
1-18
Article Number
ACU Department
Peter Faber Business School
Faculty of Law and Business
Faculty of Law and Business
Collections
Relation URI
Event URL
Open Access Status
Published as ‘gold’ (paid) open access
License
CC BY 4.0
File Access
Open
Notes
© 2023 The Author(s). Published by Elsevier Inc.
This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).