Background Note | HBS Case Collection | April 2006 (Revised April 2012)

The Role of Private Equity Firms in Merger and Acquisition Transactions

by William E. Fruhan Jr.

Abstract

Explores the importance of private equity firms in merger and acquisitions activity around the globe. In many countries, these firms now account for one quarter of the total merger and acquisition activity of all firms. The larger private equity firms generate fees for investment banking firms that exceed $350 million per year. Shows how the general partners of the fund financing the acquisition; the limited partners of the fund financing the acquisition; and the management team running the acquired firm for the private equity sponsor share the shareholder value creation in a successful leveraged buyout sponsored by a private equity firm.

Keywords: Leveraged Buyouts; Mergers and Acquisitions; Private Equity; Investment Funds; Value Creation;

Citation:

Fruhan, William E., Jr. "The Role of Private Equity Firms in Merger and Acquisition Transactions." Harvard Business School Background Note 206-101, April 2006. (Revised April 2012.)