We analyze employee-level data of more than 190,000 employees who were affected by leveraged buyouts in Germany. All employees of LBO targets are matched to similar employees according to a range of characteristics. We study the impact of LBOs on employees' wages, employment, and their career paths and distinguish how LBOs affect different segments of the labor market. The overall influence of LBOs is positive for wages and negative for employment, but both effects are small compared to job turnover and wage changes observed for matching employees not affected by LBOs. Employees with more job-related skills, younger employees and those with less specific human capital tend to benefit most from LBO-related restructuring, consistent with the hypothesis that LBOs foster technological and organizational change and benefit those whose human capital is enhanced by these processes.
{"title":"Private Equity and Human Capital Risk","authors":"Manfred Antoni, Ernst Maug, S. Obernberger","doi":"10.2139/ssrn.2602771","DOIUrl":"https://doi.org/10.2139/ssrn.2602771","url":null,"abstract":"We analyze employee-level data of more than 190,000 employees who were affected by leveraged buyouts in Germany. All employees of LBO targets are matched to similar employees according to a range of characteristics. We study the impact of LBOs on employees' wages, employment, and their career paths and distinguish how LBOs affect different segments of the labor market. The overall influence of LBOs is positive for wages and negative for employment, but both effects are small compared to job turnover and wage changes observed for matching employees not affected by LBOs. Employees with more job-related skills, younger employees and those with less specific human capital tend to benefit most from LBO-related restructuring, consistent with the hypothesis that LBOs foster technological and organizational change and benefit those whose human capital is enhanced by these processes.","PeriodicalId":127572,"journal":{"name":"ERPN: Leveraged Buyouts (Sub-Topic)","volume":"40 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-08-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123379886","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
S. Davis, J. Haltiwanger, Kyle Handley, Ron S. Jarmin, J. Lerner, Javier Miranda
Ayash and Rastad (2017) express several concerns about our 2014 analysis of private equity buyouts. We welcome their interest in our work but think their criticisms are off the mark. Some of their claims reflect a misunderstanding of the Census Bureau’s Longitudinal Business Database (LBD) and its underlying data inputs. Because the LBD has emerged as a major laboratory for empirical studies in economics and finance, we use this opportunity to reiterate and clarify some of its important features. In a similar spirit, we elaborate on steps taken to develop our large sample of private equity buyouts. We also address Ayash and Rastad’s remarks about the empirical design of our establishment-level analysis, our methods for distinguishing between leveraged buyouts (LBOs) and other private equity transactions, bankruptcy rates among firms acquired in LBOs, their assertion that we undercount large public-to-private LBOs, and other matters.
{"title":"Private Equity, Jobs, and Productivity: Reply to Ayash and Rastad","authors":"S. Davis, J. Haltiwanger, Kyle Handley, Ron S. Jarmin, J. Lerner, Javier Miranda","doi":"10.2139/ssrn.3113272","DOIUrl":"https://doi.org/10.2139/ssrn.3113272","url":null,"abstract":"Ayash and Rastad (2017) express several concerns about our 2014 analysis of private equity buyouts. We welcome their interest in our work but think their criticisms are off the mark. Some of their claims reflect a misunderstanding of the Census Bureau’s Longitudinal Business Database (LBD) and its underlying data inputs. Because the LBD has emerged as a major laboratory for empirical studies in economics and finance, we use this opportunity to reiterate and clarify some of its important features. In a similar spirit, we elaborate on steps taken to develop our large sample of private equity buyouts. We also address Ayash and Rastad’s remarks about the empirical design of our establishment-level analysis, our methods for distinguishing between leveraged buyouts (LBOs) and other private equity transactions, bankruptcy rates among firms acquired in LBOs, their assertion that we undercount large public-to-private LBOs, and other matters.","PeriodicalId":127572,"journal":{"name":"ERPN: Leveraged Buyouts (Sub-Topic)","volume":"166 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-01-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115197810","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We develop a theory of leveraged buyout (LBO) activity based on two elements: the ability of private equity-owned firms to borrow against their sponsors׳ reputation with creditors and externalities in sponsors׳ reputations due to competition and club formation. In equilibrium, the two sources of value creation in LBOs, operational improvements and financing, are complements. Moreover, sponsors that never add operational value cannot add value through financing either. Club deals are beneficial ex post by allowing low-reputation bidders with high valuations to borrow reputation from high-reputation bidders with low valuations, but they can destroy value by reducing bidders׳ investment in reputation. Unlike leverage of independent firms, driven only by firm-specific factors, buyout leverage is driven by economy-wide and sponsor-specific factors.
{"title":"A Theory of LBO Activity Based on Repeated Debt-Equity Conflicts","authors":"A. Malenko, Nadya Malenko","doi":"10.2139/ssrn.2251169","DOIUrl":"https://doi.org/10.2139/ssrn.2251169","url":null,"abstract":"We develop a theory of leveraged buyout (LBO) activity based on two elements: the ability of private equity-owned firms to borrow against their sponsors׳ reputation with creditors and externalities in sponsors׳ reputations due to competition and club formation. In equilibrium, the two sources of value creation in LBOs, operational improvements and financing, are complements. Moreover, sponsors that never add operational value cannot add value through financing either. Club deals are beneficial ex post by allowing low-reputation bidders with high valuations to borrow reputation from high-reputation bidders with low valuations, but they can destroy value by reducing bidders׳ investment in reputation. Unlike leverage of independent firms, driven only by firm-specific factors, buyout leverage is driven by economy-wide and sponsor-specific factors.","PeriodicalId":127572,"journal":{"name":"ERPN: Leveraged Buyouts (Sub-Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129489142","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper analyzes exit strategies of buyout funds in their portfolio companies following Initial Public Offerings. We use a data set of 222 buyout-backed IPOs in the United States between 1999 and 2008 including hand-collected data about each exit process to draw up a detailed road map of buyout investors’ divestment processes. Using this data, we document timing and aggressiveness of the exit strategies, and analyze to which degree a multitude of possible determinants influence the choice for a given exit strategy. Our results show that buyout funds stay invested in their portfolio companies for a substantial period of time after the IPO, and that the choice for a given exit strategy depends not only on characteristics of each respective portfolio company, but also on the financial success of the deal from the perspective of the buyout investor.
{"title":"Fare Thee Well? An Analysis of Buyout Funds' Exit Strategies","authors":"Sven Furth, Christian Rauch","doi":"10.2139/ssrn.2088883","DOIUrl":"https://doi.org/10.2139/ssrn.2088883","url":null,"abstract":"This paper analyzes exit strategies of buyout funds in their portfolio companies following Initial Public Offerings. We use a data set of 222 buyout-backed IPOs in the United States between 1999 and 2008 including hand-collected data about each exit process to draw up a detailed road map of buyout investors’ divestment processes. Using this data, we document timing and aggressiveness of the exit strategies, and analyze to which degree a multitude of possible determinants influence the choice for a given exit strategy. Our results show that buyout funds stay invested in their portfolio companies for a substantial period of time after the IPO, and that the choice for a given exit strategy depends not only on characteristics of each respective portfolio company, but also on the financial success of the deal from the perspective of the buyout investor.","PeriodicalId":127572,"journal":{"name":"ERPN: Leveraged Buyouts (Sub-Topic)","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-06-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133614341","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Jerry X. Cao, Douglas J. Cumming, Jeremy C. Goh, Meijun Qian, Xiaoming Wang
This paper examines the impact of investor protection on the value creation of LBOs. We find that target shareholders’ wealth gain is higher in countries with better investor protection. The impact of investor protection on takeover premium is larger for LBO than non-LBO transactions. We also find evidence suggesting that club LBOs are not priced lower than non-club deals after accounting for endogeneity problem. These results suggest that investor protection law may act as an important safeguard for minority shareholders in LBO transactions.
{"title":"The Impact of Investor Protection Law on Takeovers: The Case of Leveraged Buyouts","authors":"Jerry X. Cao, Douglas J. Cumming, Jeremy C. Goh, Meijun Qian, Xiaoming Wang","doi":"10.2139/ssrn.1100059","DOIUrl":"https://doi.org/10.2139/ssrn.1100059","url":null,"abstract":"This paper examines the impact of investor protection on the value creation of LBOs. We find that target shareholders’ wealth gain is higher in countries with better investor protection. The impact of investor protection on takeover premium is larger for LBO than non-LBO transactions. We also find evidence suggesting that club LBOs are not priced lower than non-club deals after accounting for endogeneity problem. These results suggest that investor protection law may act as an important safeguard for minority shareholders in LBO transactions.","PeriodicalId":127572,"journal":{"name":"ERPN: Leveraged Buyouts (Sub-Topic)","volume":"143 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116048258","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Private equity (PE) has developed into a well-established asset class with strong growth in capital commitments over the last decades. Consequently, fund returns have decreased over time and investors have become more cost conscious. Based on a unique data set of 358 PE buyout funds with vintage years between 1983 and 2007, we analyze whether the maturing PE asset class has become less costly over time. We define costs as the difference between gross and net returns (return spread) and provide a spread benchmark useful for investors to evaluate a fund’s costliness. Next, we show that, in line with our expectations, return spreads have decreased over time. However, when we control for falling gross returns causing lower performance-based fees, surprisingly, the cost of PE investing has increased. We relate the higher costs to increased levels of dry powder due to swelling capital flows into the industry. We conclude that the PE industry is a victim of its own success, suggesting that investors in the asset class should consider a more anti-cyclical investment approach.
{"title":"The Cost of Private Equity","authors":"I. Stoff, R. Braun","doi":"10.2139/ssrn.2354985","DOIUrl":"https://doi.org/10.2139/ssrn.2354985","url":null,"abstract":"Private equity (PE) has developed into a well-established asset class with strong growth in capital commitments over the last decades. Consequently, fund returns have decreased over time and investors have become more cost conscious. Based on a unique data set of 358 PE buyout funds with vintage years between 1983 and 2007, we analyze whether the maturing PE asset class has become less costly over time. We define costs as the difference between gross and net returns (return spread) and provide a spread benchmark useful for investors to evaluate a fund’s costliness. Next, we show that, in line with our expectations, return spreads have decreased over time. However, when we control for falling gross returns causing lower performance-based fees, surprisingly, the cost of PE investing has increased. We relate the higher costs to increased levels of dry powder due to swelling capital flows into the industry. We conclude that the PE industry is a victim of its own success, suggesting that investors in the asset class should consider a more anti-cyclical investment approach.","PeriodicalId":127572,"journal":{"name":"ERPN: Leveraged Buyouts (Sub-Topic)","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-11-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115181707","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We are able to shed light on the black box of restructuring tools private equity investors use to improve the operational performance of their portfolio companies. By building on previous work considering performance evaluation of PE backed companies, we analyze whether private equity improves operating efficiency and which of the typical restructuring tools are the main performance drivers. Using a set of over 300 international leveraged buyout transactions of the last thirty years, we find that while there is vast improvement in operational efficiency, these gains vary considerably. Our top performing transactions are subject to strong equity incentives, frequent asset restructuring and tight control by the investor. Furthermore, investors' experience has a positive influence while financial leverage has no influence on operational performance.
{"title":"Insight Private Equity","authors":"A. Gill, Nikolai Visnjic","doi":"10.2139/ssrn.2281229","DOIUrl":"https://doi.org/10.2139/ssrn.2281229","url":null,"abstract":"We are able to shed light on the black box of restructuring tools private equity investors use to improve the operational performance of their portfolio companies. By building on previous work considering performance evaluation of PE backed companies, we analyze whether private equity improves operating efficiency and which of the typical restructuring tools are the main performance drivers. Using a set of over 300 international leveraged buyout transactions of the last thirty years, we find that while there is vast improvement in operational efficiency, these gains vary considerably. Our top performing transactions are subject to strong equity incentives, frequent asset restructuring and tight control by the investor. Furthermore, investors' experience has a positive influence while financial leverage has no influence on operational performance.","PeriodicalId":127572,"journal":{"name":"ERPN: Leveraged Buyouts (Sub-Topic)","volume":"71 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-09-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132325804","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Financial buyers consistently paid their acquisitions cheaper than strategic buyers did in the 1990 (Butler 2001). One of the explanations is that they follow a dispassionate approach as they screen a dozen of deals for each transaction. Strategic buyers are restricted to their industry sector and therefore to a few targets. One other explanation is that financial buyers have developed good negotiation skill. They also overestimate synergies and can get carried away in the auction process (Roll 1986, Gaughan 2002). In this study, we seek to establish the existence of discount premium applied by financial buyers. Our study is important because the extant practitioner and academic literature tends to equate a discount premium with a liquidity discount. While the market prices of public companies are readily available, pricing information about private firms is scarce. The method of comparables along with estimates of the discount premium are routinely used to value private firms, typically in conjunction with valuation approaches such as forecasting and discounting future cash flows. The starting point in the method of comparables is to identify comparable public firms and determine an appropriate public-firm valuation multiple of an accounting fundamental. Using a novel data of 200 private LBO and M&A European transactions in small and midcaps, this article explain the reasons of this difference and estimate the discount premium between M&A and LBO transactions for the period 2004-2007. We follow the same methodology used by Koplein et al (2000), and Officer (2007). We have identified a set of acquisitions made by private equity firms with LBO. For each LBO transactions, we have identified an acquisition of private company, in the same industry that was acquired around the same time and that was closest in size. Then we compare the valuation price paid by the financial and the strategic acquirer. Our inferences rely on the use of enterprise-value-to-EBITDA (EV/EBITDA) and enterprise-value-to-sales (EV/SALES) multiples, two valuation multiples widely used in practice. The principal findings of our research can be summarized as follows: French LBO transactions are acquired at an average discount of 16.20 % to 17.25 % relative to similar French M&A transaction. UK LBO transactions are acquired at an average discount of 15% relative to similar UK M&A transaction. Both financial and strategic UK buyers paid their acquisitions higher than French and European buyers. Using both a univariate and a multivariate approach that overcome the selection biais due to difference in size and controls for differences in industry, firm size and growth, we find that financial buyers pays their acquisition lowers than strategic buyers with a discount premium that ranges from 16 and 24%.
{"title":"The Discount Premium between Private M&A and LBO Transactions","authors":"Anis Mnejja, Jean-Michel Sahut","doi":"10.2139/SSRN.1676139","DOIUrl":"https://doi.org/10.2139/SSRN.1676139","url":null,"abstract":"Financial buyers consistently paid their acquisitions cheaper than strategic buyers did in the 1990 (Butler 2001). One of the explanations is that they follow a dispassionate approach as they screen a dozen of deals for each transaction. Strategic buyers are restricted to their industry sector and therefore to a few targets. One other explanation is that financial buyers have developed good negotiation skill. They also overestimate synergies and can get carried away in the auction process (Roll 1986, Gaughan 2002). In this study, we seek to establish the existence of discount premium applied by financial buyers. Our study is important because the extant practitioner and academic literature tends to equate a discount premium with a liquidity discount. While the market prices of public companies are readily available, pricing information about private firms is scarce. The method of comparables along with estimates of the discount premium are routinely used to value private firms, typically in conjunction with valuation approaches such as forecasting and discounting future cash flows. The starting point in the method of comparables is to identify comparable public firms and determine an appropriate public-firm valuation multiple of an accounting fundamental. Using a novel data of 200 private LBO and M&A European transactions in small and midcaps, this article explain the reasons of this difference and estimate the discount premium between M&A and LBO transactions for the period 2004-2007. We follow the same methodology used by Koplein et al (2000), and Officer (2007). We have identified a set of acquisitions made by private equity firms with LBO. For each LBO transactions, we have identified an acquisition of private company, in the same industry that was acquired around the same time and that was closest in size. Then we compare the valuation price paid by the financial and the strategic acquirer. Our inferences rely on the use of enterprise-value-to-EBITDA (EV/EBITDA) and enterprise-value-to-sales (EV/SALES) multiples, two valuation multiples widely used in practice. The principal findings of our research can be summarized as follows: French LBO transactions are acquired at an average discount of 16.20 % to 17.25 % relative to similar French M&A transaction. UK LBO transactions are acquired at an average discount of 15% relative to similar UK M&A transaction. Both financial and strategic UK buyers paid their acquisitions higher than French and European buyers. Using both a univariate and a multivariate approach that overcome the selection biais due to difference in size and controls for differences in industry, firm size and growth, we find that financial buyers pays their acquisition lowers than strategic buyers with a discount premium that ranges from 16 and 24%.","PeriodicalId":127572,"journal":{"name":"ERPN: Leveraged Buyouts (Sub-Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-09-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130064312","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We present a dynamic agency model in which the LBO fund may write the entrepreneur's project off at the end of the starting stage to invest in a competitive project. The two partners provide unobservable efforts in both stages to enhance the productivity of the acquired company. We show that under restrictive conditions, the debt-equity contracts induce the entrepreneur and the LBO fund to provide the first best efforts under restrictive conditions in the two stages. Moreover, the write-off threat boosts the incentives of the entrepreneur and the LBO fund such that they provide high efforts. If the compensation cost is exogenous, the sharing rule of this cost depends on the quality of the competitive project. The entrepreneur and the bank share the amount of compensation if it is not very profitable. Otherwise, it is pledged to the entrepreneur. If the compensation's amount is endogenous, in order to induce the entrepreneur to provide high effort, the optimal financial contracts must give her the entire compensation's revenue.
{"title":"Leveraged Buy Out: Dynamic Agency Model with Write-Off Option","authors":"O. Yousfi","doi":"10.2139/ssrn.1361474","DOIUrl":"https://doi.org/10.2139/ssrn.1361474","url":null,"abstract":"We present a dynamic agency model in which the LBO fund may write the entrepreneur's project off at the end of the starting stage to invest in a competitive project. The two partners provide unobservable efforts in both stages to enhance the productivity of the acquired company. We show that under restrictive conditions, the debt-equity contracts induce the entrepreneur and the LBO fund to provide the first best efforts under restrictive conditions in the two stages. Moreover, the write-off threat boosts the incentives of the entrepreneur and the LBO fund such that they provide high efforts. If the compensation cost is exogenous, the sharing rule of this cost depends on the quality of the competitive project. The entrepreneur and the bank share the amount of compensation if it is not very profitable. Otherwise, it is pledged to the entrepreneur. If the compensation's amount is endogenous, in order to induce the entrepreneur to provide high effort, the optimal financial contracts must give her the entire compensation's revenue.","PeriodicalId":127572,"journal":{"name":"ERPN: Leveraged Buyouts (Sub-Topic)","volume":"63 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-02-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124014646","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Ulf Axelson, P. Strömberg, T. Jenkinson, M. Weisbach
This paper provides an empirical analysis of the financial structure of large recent buyouts. We collect detailed information of the financings of 153 large buyouts (averaging over $1 billion in enterprise value). We document the manner in which these important transactions are financed. Buyout leverage is cross-sectionally unrelated to the leverage of matched public firms, and is largely driven by other factors than what explains leverage in public firms. In particular, the economy-wide cost of borrowing seems to drive leverage. Prices paid in buyouts are related to the prices observed for matched firms in the public market, but are also strongly affected by the economy-wide cost of borrowing. These results are consistent with a view in which the availability of financing impacts booms and busts in the private equity market.
{"title":"Leverage and Pricing in Buyouts: An Empirical Analysis","authors":"Ulf Axelson, P. Strömberg, T. Jenkinson, M. Weisbach","doi":"10.2139/ssrn.1344023","DOIUrl":"https://doi.org/10.2139/ssrn.1344023","url":null,"abstract":"This paper provides an empirical analysis of the financial structure of large recent buyouts. We collect detailed information of the financings of 153 large buyouts (averaging over $1 billion in enterprise value). We document the manner in which these important transactions are financed. Buyout leverage is cross-sectionally unrelated to the leverage of matched public firms, and is largely driven by other factors than what explains leverage in public firms. In particular, the economy-wide cost of borrowing seems to drive leverage. Prices paid in buyouts are related to the prices observed for matched firms in the public market, but are also strongly affected by the economy-wide cost of borrowing. These results are consistent with a view in which the availability of financing impacts booms and busts in the private equity market.","PeriodicalId":127572,"journal":{"name":"ERPN: Leveraged Buyouts (Sub-Topic)","volume":"31 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-02-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122993959","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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