Do Buyouts (Still) Create Value?

59 Pages Posted: 25 Mar 2008 Last revised: 25 Aug 2009

See all articles by Shourun Guo

Shourun Guo

Duke Energy Corp.

Edith S. Hotchkiss

Boston College - Carroll School of Management

Weihong Song


Multiple version iconThere are 3 versions of this paper

Date Written: August 2009


We examine whether, and how, leveraged buyouts from the most recent wave of public to private transactions created value. For a sample of 192 buyouts completed between 1990 and 2006, we show that these deals are somewhat more conservatively priced and less levered than their predecessors from the 1980s. For the subsample of deals with post-buyout data available, median market and risk adjusted returns to pre- (post-) buyout capital invested are 72.5% (40.9%). In contrast, gains in operating performance are either comparable to or slightly exceed those observed for benchmark firms. Increases in industry valuation multiples and realized tax benefits from increasing leverage while private are each economically as important as operating gains in explaining realized returns.

Keywords: leverage buyouts, value creation

JEL Classification: G34

Suggested Citation

Guo, Shourun and Hotchkiss, Edith S. and Song, Weihong, Do Buyouts (Still) Create Value? (August 2009). Journal of Finance, Forthcoming, Available at SSRN:

Shourun Guo

Duke Energy Corp. ( email )

139 East Fourth Street
Cincinnati, OH 45202
United States

Edith S. Hotchkiss (Contact Author)

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Department of Finance Fulton Hall, Room 330
Chestnut Hill, MA 02467
United States
617-552-3240 (Phone)
617-552-0431 (Fax)

Weihong Song


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