What Drives Leverage in Leveraged Buyouts? An Analysis of European LBOs' Capital Structure
48 Pages Posted: 18 Feb 2009
Date Written: February 15, 2009
Abstract
This paper examines leverage in European private equity led LBOs. We use a unique, self-constructed sample of 126 European private equity sponsored buyouts completed between June 2000 and June 2007. We find that leverage determinants derived from classical capital structure theories do not explain leverage in LBOs, while these determinants do drive leverage in a control group of comparable public firms. Rather, we document that leverage levels in LBOs are related to the prevailing conditions in the debt market. In addition, our results support the hypothesis that the reputation of the private equity sponsor involved in the buyout is positively related to LBO leverage. Finally, also the type of buyout (primary versus secondary) is related to the amount of leverage used.
Keywords: leverage, capital structure, buyouts, LBO, private equity
JEL Classification: G32, G24
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Leveraged Buyouts and Private Equity
By Steven N. Kaplan and Per Strömberg
-
Leveraged Buyouts and Private Equity
By Steven N. Kaplan and Per Strömberg
-
Do Buyouts (Still) Create Value‘
By Shourun Guo, Edith S. Hotchkiss, ...
-
Do Buyouts (Still) Create Value?
By Shourun Guo, Edith S. Hotchkiss, ...
-
Do Buyouts (Still) Create Value?
By Shourun Guo, Edith S. Hotchkiss, ...
-
Private Equity and Long-Run Investment: The Case of Innovation
By Morten Sorensen, Per Strömberg, ...
-
Private Equity and Long-Run Investment: The Case of Innovation
By Josh Lerner, Morten Sorensen, ...
-
Private Equity and Long-Run Investment: The Case of Innovation
By Morten Sorensen, Per Strömberg, ...
-
Private Equity, Leveraged Buyouts and Governance
By Douglas J. Cumming, Mike Wright, ...