Do Publicly Listed Private Equity Firms Make Bad Deals?

Abstract

A number of private equity (PE) fund management firms (GPs) have sought listings on public stock exchanges; also, investors, regulators, and PE firms, are showing interest in permanent PE investment capital raised on public markets. However concerns have been expressed that both of these developments weaken the incentives for private equity firms to make good deals and make them work. In this study, we construct a novel and comprehensive dataset of buyout deal performance measures for public and private PE firms. We find little difference in deal size or performance for deals by private GPs and permanent PE firms. However, deals by public GPs are on average 3 times larger than those of private GPs, and they earn 22% higher deal multiples.