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  • July 2010
  • Article
  • Journal of Financial Economics

Board Interlocks and the Propensity to Be Targeted in Private Equity Transactions

By: Toby E. Stuart and Soojin Yim
  • Format:Print
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Abstract

In this paper, we examine the propensity for U.S. public companies to become targets for private equity-backed, take-private transactions. We consider the characteristics of 483 private equity-backed deals in the 2000-2007 period relative to public companies, and find that, in addition to the financial drivers studied in previous works, board characteristics and director networks are also associated with deal generation. We find that a company that has a director who has had LBO experience through prior board service is approximately 40% more likely to receive a private equity offer, and that the strength of this effect varies with the influence of the director and the quality of the prior LBO experience. This effect is robust to the most likely alternative explanations and supports the idea that directors and social networks play an influential role in change-of-control transactions.

Keywords

Board Interlocks; Board Networks; Social Networks; Private Equity; Corporate Governance; Public Ownership; Market Transactions; Governing and Advisory Boards; United States

Citation

Stuart, Toby E., and Soojin Yim. "Board Interlocks and the Propensity to Be Targeted in Private Equity Transactions." Journal of Financial Economics 97, no. 1 (July 2010): 174–189.
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About The Author

Toby E. Stuart

Strategy
→More Publications

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    Sirtris Pharmaceuticals: Living Healthier, Longer (Abridged)

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    • 2011
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    Inside the Black Box of the Corporate Staff: An Exploratory Analysis Through the Lens of E-Mail Networks

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More from the Authors
  • Sirtris Pharmaceuticals: Living Healthier, Longer (Abridged) By: Toby Stuart and James Weber
  • GSK's Acquisition of Sirtris: Independence or Integration? (Abridged) By: Toby Stuart and James Weber
  • Inside the Black Box of the Corporate Staff: An Exploratory Analysis Through the Lens of E-Mail Networks By: Toby E. Stuart
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