Growth LBOs

42 Pages Posted: 6 Mar 2009 Last revised: 28 Sep 2012

See all articles by Quentin Boucly

Quentin Boucly

affiliation not provided to SSRN

David Alexandre Sraer

University of California, Berkeley; Princeton University

David Thesmar

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA)

Date Written: November 01, 2011


Using a dataset of 839 French deals, we look at the change in corporate behavior following an LBO relative to an adequately chosen control group. In the three years following a leveraged buyout, targets become more profitable, grow much faster than their peer group, issue additional debt and increase capital expenditures. We then provide evidence consistent with the idea that in our sample, private equity funds create value by relaxing credit constraints, allowing LBO targets to take advantage of hitherto unexploited growth opportunities. First, post-buyout growth is concentrated among private-to-private transactions, i.e. deals where the seller is an individual, as opposed to divisional buyouts or public-to-private LBOs where the seller is a private or a public firm. Second, the observed post-buyout growth in size and post- buyout increase in debt and capital expenditures are stronger when the targets operate in an industry that is relatively more dependent on external finance. These results contrast with existing evidence that LBO targets invest less or downsize.

Keywords: LBO, Employment, Financial Constraints

JEL Classification: G24, G32, G34

Suggested Citation

boucly, quentin and Sraer, David Alexandre and Thesmar, David, Growth LBOs (November 01, 2011). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: or

Quentin Boucly

affiliation not provided to SSRN ( email )

David Alexandre Sraer (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

David Thesmar

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States
16172259767 (Phone)

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