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Leverage and Pricing in Buyouts: An Empirical Analysis*

48 Pages Posted: 2 Nov 2007  

Ulf Axelson

London School of Economics; Swedish Institute for Financial Research (SIFR)

Tim Jenkinson

University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER)

Per Strömberg

Swedish House of Finance

Date Written: August 2007

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 both leverage and pricing in buyouts. These results are consistent with a view in which the availability of financing impacts booms and busts in the private equity market.

Keywords: Private equity, capital structure, buyouts

Suggested Citation

Axelson, Ulf and Jenkinson, Tim and Weisbach, Michael S. and Strömberg, Per, Leverage and Pricing in Buyouts: An Empirical Analysis* (August 2007). Swedish Institute for Financial Research Conference on The Economics of the Private Equity Market. Available at SSRN: https://ssrn.com/abstract=1027127 or http://dx.doi.org/10.2139/ssrn.1027127

Ulf Axelson (Contact Author)

London School of Economics ( email )

United Kingdom

Swedish Institute for Financial Research (SIFR) ( email )

Drottninggatan 89
SE-113 59 Stockholm, SE-113 60
Sweden

Tim Jenkinson

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
United Kingdom
+44 1865 288916 (Phone)
+44 1865 288831 (Fax)

HOME PAGE: http://www.sbs.oxford.edu/timjenkinson

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Per Stromberg

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

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