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Licensed Unlicensed Requires Authentication Published by De Gruyter November 28, 2014

Public versus Private Market Participants and the Prices Paid for Private Companies

  • Vicentiu Covrig and Daniel L. McConaughy EMAIL logo

Abstract

This study examines the impact of the market participant on prices paid for private companies in the Pratt’s Stats database. We examine approximately 4,200 transactions over the period of 2000–2011 for companies with sales of $1 million or more. We find that public buyers pay more after controlling for the target’s size, industry, age, estimated growth rate, and profitability, as well as the time of the transaction. We also find that smaller companies and C-corporations sell at higher multiples. Our results are consistent with the hypothesis that the price paid for a company is related to whether the market participant is private or public. Further, our results provide additional insights to users of the Pratt’s Stats database regarding the characteristics of the transactions in this well-known and often-used database.

Acknowledgment

We want to thank Roger Grabowski, Shannon Pratt, and all the other participants of the Valuation Study Group who provided helpful comments. Many thanks to our colleague Mohamed Cader for his research assistance. We also thank the anonymous reviewers for their helpful comments which have improved this paper.

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Published Online: 2014-11-28
Published in Print: 2015-1-1

©2015 by De Gruyter

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