Life after Privatization

The purpose of Raj Chari’s book is to decipher what happened to state-owned enterprises (SOEs) after they were privatised in the United Kingdom, France, Italy, Germany and Spain. To answer this, he offers a fresh conceptualisation arising out of a review of the literature on both privatisations and mergers and acquisitions (M&A). The focus on those areas arises, in part, because of the nature of M&A activity of privatised firms. There is strong evidence that privatised firms have merged and been acquired in recent decades, and Chari seeks to determine how the firms can be characterised today from a theoretical perspective. In doing so, he differentiates (using robust empirical tests) between firms he calls ‘alphas’ (global leaders that have never been taken over) and ‘betas’ (not global leaders and have been taken over).
To understand why firms became alphas or betas, the book considers a number of factors such as the role of the state during privatisation, competitiveness of firms, liberalisation policies, the role of regulatory authorities and the influence of lobbying. These factors are given context in chapters 3, 4 and 5 where the book offers empirical analyses of privatisations in the airline, automobile and electricity sectors. From the findings, Chari develops an inductive theory for which he provides the acronym ‘LIFESHAPERS’. The conclusion is that the impact of liberalisation, the influence of states and the actions of regulatory authorities all influence whether a firm becomes an alpha or beta.