Private Equity Syndication: Agency Costs, Reputation and Collaboration |
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| Authors: | Miguel Meuleman Mike Wright Sophie Manigart and Andy Lockett |
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| Institution: | The first author is from Vlerick Leuven Gent Management School and Centre for Management Buy-out Research Nottingham University Business School. The second author is from the Centre for Management Buy-out Research Nottingham University Business School and RSM, Erasmus University, Rotterdam. The third author is from Vlerick Leuven Gent Management School and Universiteit Gent, Belgium. The fourth author is from the Centre for Management Buy-out Research Nottingham University Business School. They would like to thank the editor and the anonymous referee for very helpful comments. Thanks to Barclays Private Equity for financial support. |
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| Abstract: | Abstract: Syndicates are a form of inter-firm alliance in which two or more private equity firms invest together in an investee firm and share a joint pay-off, and are an enduring feature of the leveraged buyout (LBO) and private equity industry. This study examines the relationship between syndication and agency costs at the investor-investee level, and the extent to which the reputation and the network position of the lead investor mediate this relationship. We examine this relationship using a sample of 1,122 buyout investments by 80 private equity companies in the UK between 1993 and 2006. Our findings show that where agency costs are highest, and hence ex-post monitoring by the lead investor is more important, syndication is less likely to occur. The negative relationship between agency costs and syndication, however, is alleviated by the reputation and network position of the lead investor firm. |
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| Keywords: | private equity syndication agency theory leveraged buyouts venture capital |
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