The role of sponsor’s previous experience in syndicated private equity deals

Abstract

Syndication allows two or more private equity sponsors to takeover targets that would have been overlooked due to lacking financial resources, risk capacity and/or skills (especially highly specialized sponsors may consider syndication). While financial resources mostly belong to size, skills come from sponsor’s experience: beyond its amount, different types of skills i.e. specialization profiles – come from different types of experience. Literature about private equity syndication is mostly devoted to its determinants, while the performance implications of syndication compared to stand-alone private equity are under-researched. This paper investigates the effect of different types of sponsors’ previous experience on the target’s performance (ROA) and whether this relation changes in syndicated versus stand-alone deals