Comparing Apples to Peers: Studying the Importance of Industry Affiliation for Private Company Discounts in Europe

Sammanfattning: Private company transactions have been found to be, on average, valued lower than comparable public transactions, giving rise to what is often in the literature called a Private Company Discount (PCD). Building on previous literature, this study extends our understanding of how the occurrence of a PCD might differ between different industries, and what firm characteristics that could explain such cross-sectional heterogeneity. Using a thorough matching procedure, building comparable portfolios of European public transactions, this study finds an average PCD of 33%, ranging between 25-65%, depending on industry. Some explanatory factors are found to be significant for all industries, such as profitability. Interestingly, others, such as financial sponsors being the acquirer, seem to matter only for the service industry. Through industry granularity, this study thus deepens our understanding of what matters to the occurrence of a private company discount - and not.