How do Lead Financiers Select Their Partners in Buyout Syndicates? Empirical Results from Buyout Syndicates in Europe

Relying on a unique dataset covering 366 buyout syndicates in Europe over the period 1999–2009, we empirically investigate the partnering decisions of lead financiers. We find that lead financiers select investors with whom they developed a prior relationship, either directly or indirectly. Also, lead financiers prefer partners with expertise in the target industry and partners with knowledge about target-country institutions, particularly when their own knowledge in these areas is limited. Finally, they favor investors with a similar level of cognition and status. We further show that these results are mainly driven by the risky buyouts in the sample. Overall, the above partnering choices are found to have genuine economic effects for the post-buyout performance of target firms, with expertise as regards the target industry and target-country institutions having the largest beneficial effect