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Leverage and Pricing in Buyouts: An Empirical AnalysisUlf AxelsonLondon School of Economics; Swedish Institute for Financial Research (SIFR) Per StrömbergStockholm School of Economics; University of Chicago - Booth School of Business; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); Stockholm School of Economics - Department of Finance Tim JenkinsonUniversity of Oxford - Said Business School; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI) Michael S. WeisbachOhio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER) February 15, 2009 EFA 2009 Bergen Meetings Paper 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.
Number of Pages in PDF File: 53 Keywords: Private equity, capital structure, leveraged buyouts JEL Classification: G24, G32, G34 working papers seriesDate posted: February 19, 2009Suggested CitationContact Information
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