How Private Is Private Equity, and at What Cost?
In preparing this Article, I benefited greatly from conversations with several private-equity partners (both limited and general) as well as the excellent research assistance of Tracey Chenoweth. Thanks also, for insightful comments and advice, to Bobby Bartlett, Kate Litvak, Bob Rasmussen, Larry Ribstein, and Randall Thomas.
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The literature on private equity ignores the impact of the securities laws. This is an oversight: key facets of private-equity structure (in particular, the limited control, liquidity, and information rights that are typical of limited partner investors) can be explained as an attempt to escape the reach of securities antifraud rules. The benefit of circumventing these rules is that doing so prevents the unwinding of optimal risk allocation between general and limited partners that would otherwise occur. This does, however, come at a significant cost, which is the exacerbation of agency costs between limited partner investors and the general partner manager; this necessitates the massive performance-based compensation that general partners receive, which is inefficient from a first-best perspective. Hence, reforming the securities laws would benefit not just public companies, but also private equity.
He thanks Russ Ryan, Will Horvath, and the University of Chicago Law Review Online team.
District courts should consider the value of percolation in a given case as part of their analysis in deciding whether to grant a § 1404(a) motion. The value of doing so is even more pronounced in cases with a clear pattern of repeat-player defendants moving for transfer for no apparent reason other than convenience—and perhaps a more amenable court. In such cases, district courts should directly weigh the benefits of percolation against those of judicial economy.
We thank Lucian Bebchuk, Alon Brav, Ryan Bubb, Ed Cheng, Quinn Curtis, Elisabeth de Fontenay, Jared Ellias, Jill Fisch, Joe Grundfest, Cam Harvey, Scott Hirst, Colleen Honigsberg, Marcel Kahan, Louis Kaplow, Jonathan Klick, Brian Leiter, Saul Levmore, Dorothy Lund, John Morley, Mariana Pargendler, Elizabeth Pollman, Roberta Romano, Paolo Saguato, Holger Spamann, George Vojta, and Michael Weber for valuable suggestions and discussions. This Article has benefited from comments by workshop participants at Columbia Law School, George Mason University Antonin Scalia Law School, Georgetown University Law Center, Harvard Law School, Stanford Law School, UC Berkeley School of Law, the University of Chicago Law School, the University of Oxford Faculty of Law, the University of Pennsylvania Carey Law School, the University of Toronto Faculty of Law, the University of Virginia School of Law, and the Washington University School of Law, as well as at the American Law and Economics Association Annual Meeting, the Corporate & Securities Litigation Workshop, the Labex ReFi-NYU-SAFE/LawFin Law & Banking/Finance Conference, and the Utah Winter Deals Conference. Robertson gratefully acknowledges the support of the Douglas Clark and Ruth Ann McNeese Faculty Research Fund. Katy Beeson and Levi Haas provided exceptional research assistance. All errors are our own.
We thank Lucian Bebchuk, Alon Brav, Ryan Bubb, Ed Cheng, Quinn Curtis, Elisabeth de Fontenay, Jared Ellias, Jill Fisch, Joe Grundfest, Cam Harvey, Scott Hirst, Colleen Honigsberg, Marcel Kahan, Louis Kaplow, Jonathan Klick, Brian Leiter, Saul Levmore, Dorothy Lund, John Morley, Mariana Pargendler, Elizabeth Pollman, Roberta Romano, Paolo Saguato, Holger Spamann, George Vojta, and Michael Weber for valuable suggestions and discussions. This Article has benefited from comments by workshop participants at Columbia Law School, George Mason University Antonin Scalia Law School, Georgetown University Law Center, Harvard Law School, Stanford Law School, UC Berkeley School of Law, the University of Chicago Law School, the University of Oxford Faculty of Law, the University of Pennsylvania Carey Law School, the University of Toronto Faculty of Law, the University of Virginia School of Law, and the Washington University School of Law, as well as at the American Law and Economics Association Annual Meeting, the Corporate & Securities Litigation Workshop, the Labex ReFi-NYU-SAFE/LawFin Law & Banking/Finance Conference, and the Utah Winter Deals Conference. Robertson gratefully acknowledges the support of the Douglas Clark and Ruth Ann McNeese Faculty Research Fund. Katy Beeson and Levi Haas provided exceptional research assistance. All errors are our own.
We thank Lucian Bebchuk, Alon Brav, Ryan Bubb, Ed Cheng, Quinn Curtis, Elisabeth de Fontenay, Jared Ellias, Jill Fisch, Joe Grundfest, Cam Harvey, Scott Hirst, Colleen Honigsberg, Marcel Kahan, Louis Kaplow, Jonathan Klick, Brian Leiter, Saul Levmore, Dorothy Lund, John Morley, Mariana Pargendler, Elizabeth Pollman, Roberta Romano, Paolo Saguato, Holger Spamann, George Vojta, and Michael Weber for valuable suggestions and discussions. This Article has benefited from comments by workshop participants at Columbia Law School, George Mason University Antonin Scalia Law School, Georgetown University Law Center, Harvard Law School, Stanford Law School, UC Berkeley School of Law, the University of Chicago Law School, the University of Oxford Faculty of Law, the University of Pennsylvania Carey Law School, the University of Toronto Faculty of Law, the University of Virginia School of Law, and the Washington University School of Law, as well as at the American Law and Economics Association Annual Meeting, the Corporate & Securities Litigation Workshop, the Labex ReFi-NYU-SAFE/LawFin Law & Banking/Finance Conference, and the Utah Winter Deals Conference. Robertson gratefully acknowledges the support of the Douglas Clark and Ruth Ann McNeese Faculty Research Fund. Katy Beeson and Levi Haas provided exceptional research assistance. All errors are our own.
For years, academic experts have championed the widespread adoption of the “Fama-French” factors in legal settings. Factor models are commonly used to perform valuations, performance evaluation and event studies across a wide variety of contexts, many of which rely on data provided by Professor Kenneth French. Yet these data are beset by a problem that the experts themselves did not understand: In a companion article, we document widespread retroactive changes to French’s factor data. These changes are the result of discretionary changes to the construction of the factors and materially affect a broad range of estimates. In this Article, we show how these retroactive changes can have enormous impacts in precisely the settings in which experts have pressed for their use. We provide examples of valuations, performance analysis, and event studies in which the retroactive changes have a large—and even dispositive—effect on an expert’s conclusions.
We would like to thank the participants of the How AI Will Change the Law Symposium, cohosted by the Coase-Sandor Institute, the University of Chicago Law Review Online, and Oxford Business Law Blog, for their helpful comments.
We would like to thank the participants of the How AI Will Change the Law Symposium, cohosted by the Coase-Sandor Institute, the University of Chicago Law Review Online, and Oxford Business Law Blog, for their helpful comments.
Artificial intelligence (AI) has the potential to alter the interpretation of the duties of care, skill, and diligence. As these duties form the foundation for the BJR and equivalent provisions, the development of AI is also expected to impact the BJR. There is a broadening importance, in an increasingly data-driven business environment, of the requirement to gather sufficient information before making a decision and to use information in a valid manner. Changes are both quantitative (how much information to collect) and qualitative (which types of information to collect). The changes also relate to the methods of decision-making, including the role of measures and statistics over intuition.