Business, Management and Accounting
8 years ago

Target CEO retention in private equity acquisitions benefits shareholders with increased value.

SSRN Electronic Journal
Does Target CEO Retention in Acquisitions Involving Private Equity Acquirers Harm Target Shareholders?
Leonce Bargeron, Frederik P. Schlingemann, Chad J. Zutter, René M. Stulz

Paper Summary

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Target CEO retention in acquisitions involving private equity firms does not harm target shareholders. In fact, retaining better performing CEOs can benefit shareholders by increasing the firm's performance and the premium paid by the private equity firm. The study found that when CEOs are retained, target shareholders gain an additional 7% to 23% of the firm's value compared to when the CEO is not retained. Additionally, there is no evidence that the target's value is artificially lowered before a private equity acquisition where the CEO is retained.