Do Investor Origins Affect Private Equity Investment Syndicates? A Case from India

Abstract

The private equity industry has become a growing international phenomenon in recent years. As capital providers, PE firms are often seen to form collaborative relationships with one another during the investment process. These alliances can be pure syndicates—with similarly residing PE investors (domestic/foreign) or co-investments—when domestic and foreign PE investors jointly have stakes in the deal. In this study, the authors examine the composition of syndicates and their effect on investment patterns. They set their study in India, a country which is a rather late entrant into the PE market but has witnessed dramatic increases in PE investment in the last two decades. Using data from 1998 to 2014, pure syndicates are compared against those that have co-investment. The study also seeks to analyze if different syndicate types affect specific deal characteristics such as industry sector and investment size. Finally, the effects of investor origins and co-investment on investment size are explored. The results of the analysis indicate significant differences between industry sectors and deal characteristics, thus implying differing investor preferences. Regression analysis shows that co-investments were significantly associated with investment sizes. TOPICS: Private equity, performance measurement, emerging markets