There is currently considerable enthusiasm for emerging private equity markets, where investors believe they have access to “untapped deal flow”. Early entry may allow them to capitalize on exceptional growth opportunities; however, the pioneering investors enter immature capital markets and have no local transaction experience. This may outweigh the potential benefits of low deal-flow competition and expected growth. We address this potential drawback by analyzing a unique, hand-collected dataset of emerging private equity market transactions. We refer to 1157 deals in 86 host countries between 1973 and 2009, and find that early transactions underperform later deals. The evidence presented is robust and consistent with the improvement in the deal-making environment over time and the benefits of learning how to conduct emerging market private equity deals. The learning benefits are stronger if investors are located in the same country as the investee firm.

This paper investigates the performance of venture capital-backed (VC-backed) firms upon their exits through mergers with special purpose acquisition companies (SPACs) or “more traditional” initial public offerings (IPOs) during the recent SPAC wave. Compared to their IPO peers, VCbacked ventures merging with SPACs tend to exhibit smaller size, less current and analystprojected future profitability, and additional characteristics that indicate lower venture quality. Notably, SPACs merging with VC-backed ventures demonstrate significant underperformance relative to both SPACs merging with non-VC-backed companies and “standard” IPOs. This suggests that VCs may have exploited a relative lack of regulation and investor naivety. They may have presented their lower-quality ventures as appealing opportunities for mergers with SPACs, which resulted in their substantial underperformance.