Research event

Investing in Politics: Private Equity and Coordinated Political Activity (co-authored by David Szakonyi)

Private equity (PE) firms have rapidly become some of the largest financiers in US politics. In this paper, we examine the role of coordinated corporate political activity in the private equity playbook for managing and retooling portfolio company acquisitions. First, we assemble a unique data set of leveraged buyouts of US companies from 2008-2019. Using a doubly robust difference-in-differences estimator, we show that portfolio companies acquired by private equity subsequently increase their federal lobbying expenditures and campaign contributions. These effects are particularly large for companies that had stayed out of politics before the acquisition as well as those acquired by politically active PE firms. We also find evidence that PE managers coordinate lobbying strategies among their portfolio companies to improve cost-effectiveness and narrow advocacy goals. Taken together, our results demonstrate that the PE industry’s financial performance owes not just to the financial and operational engineering, but also an optimization of political strategy to increase firm value.