Leveraged Buyouts of Private Companies

39 Pages Posted: 3 Aug 2011

See all articles by Ji-Woong Chung

Ji-Woong Chung

Korea University - Department of Finance

Date Written: August 3, 2011

Abstract

Over the last two decades, the number (enterprise value) of leveraged buyout transactions involving privately held targets totals more than 10,000 (over $850 billion), accounting for 46% (21%) of the worldwide leveraged buyout market. Yet the vast majority of academic studies focus on the buyouts of publicly held targets. This paper investigates the effects of leveraged buyouts on privately held targets. I find that, unlike the corporate restructuring process of public firms after the buyouts, private targets sponsored by private equity firms grow substantially after the buyouts. The overall evidence suggests that private equity firms, through leveraged buyouts, facilitate private targets’ growth by alleviating targets’ investment constraints.

Keywords: Leveraged buyout, Private equity, Private firms, Agency costs, Investment constraints

JEL Classification: G32, G34

Suggested Citation

Chung, Ji-Woong, Leveraged Buyouts of Private Companies (August 3, 2011). Available at SSRN: https://ssrn.com/abstract=1904342 or http://dx.doi.org/10.2139/ssrn.1904342

Ji-Woong Chung (Contact Author)

Korea University - Department of Finance ( email )

Seoul, 136-701
United States

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