Press release
Published today in the HBR
Do Politics Shape Buyout Performance?
by Pr. Oliver Gottschalg and Pr. Aviad Pe’er
Jouy-en-Josas, 24 October 2008
The paper “Do Politics Shape Buyout Performance? », published today in the Harvard
Business Review, presents the conclusions of a study on 5,870 buyout investments between
1980 and 2003. Pr. Oliver Gottschalg, Assistant Professor of Strategy and Business Policy at
HEC Paris and Pr. Aviad Pe’er, Assistant Professor of Management and Organizations at NewYork University’s Stern School of Business show that the activity and performance of Private
Equity Firms is highly dependent on the political environment in which they operate.
In the United States, a company headquartered in a right-wing ‘Republican’ (Red) state is 27%
more likely to undergo a buyout than an otherwise identical company based in a left-wing
‘Democratic’ (Blue) state. Buyouts in Red states are also more successful – investors earn a 8%
higher annual net return (IRR) from Red-State buyouts than from comparable Blue State
investments. These findings are consistent with the assertion that a right-wing political leaning
facilitates buyout value creation while a left-wing political leaning likely impedes it by increasing
the costs associated with the mechanisms through which buyouts create value.
These results are more relevant now than ever at this time of the presidential election in the
United States and with the worldwide financial crisis which is likely to spur investment
opportunities for buyout funds (e.g., Goldman Sachs Group, October 2008).
The paper was presented at the Academy of Management annual conference, the Atlanta
Competitive Advantage Conference and is also scheduled to be presented at the Strategic
Management Society conference, and at the Israeli Strategy Conference.
Professor Oliver Gottschalg is part of the Strategy Department at HEC Paris. He serves
as Director of the Entrepreneurship Track in the HEC MBA program, co-directs the HEC-INSEAD
Buyout Research Group and teaches courses on strategy, entrepreneurship, business plan
design and management buyouts. His current research focuses on the strategic logic and the
performance determinants of private equity investments.
Press Contact, HEC Paris
Elisabeth de Réals

+33 1 39 67 94 23
 +33 1 39 67 94 46
dereals@hec.fr
www.hec.edu