ABSTRACT
This chapter explores collaboration decisions among participants and their outcomes in Private Equity (PE) investments. Although the PE industry has grown in size and complexity, research on collaboration decisions in leveraged buyout (LBO) transactions and their implications on deal financing is still very limited. Collaboration decisions between PE firms and targets are also particularly interesting because buyouts are essentially complex investments in targets that are informationally opaque. While there is extensive literature on the performance of PE firms, research attributing the performance of PE firms, banks, and targets to the collaboration decisions taken during deal structuring is generally lacking. Despite the growing internationalization of PE through cross-border LBOs, the mechanisms through which PE firms and banks invest in foreign LBO targets and gain experience and reputation in foreign buyout markets remain poorly understood. Power differentials feature prominently in bank-borrower relationships and are important in the LBO context as both PE firms and targets often develop strong banking relationships.
