It’s hard to get good information about private equity

Here’s today’s Op-Ed by Pat Toomey, praising private equity.  I am tracking down sources on this topic and will pass along what I learn.

I do now trust at least one result: public firms will buy up targets without much discretion, but private equity has been making acquisition decisions in a more rational fashion:

We find that the announcement gain to target shareholders from acquisitions is significantly lower if a private firm instead of a public firm makes the acquisition.  Non-operating firms like private equity funds make the majority of private bidder acquisitions.  On average, target shareholders receive 55% more if a public firm instead of a private equity fund makes the acquisition.  There is no evidence that the difference in premiums is driven by observable differences in targets.  We find that target shareholder gains depend critically on the managerial ownership of the bidder.  In particular, there is no difference in target shareholder gains between acquisitions made by public bidders with high managerial ownership and by private bidders.  Such evidence suggests that the differences in managerial incentives between private and public firms have an important impact on target shareholder gains from acquisitions and managers of firms with diffuse ownership may pay too much for acquisitions.

Here is the paper.