The Influence of Leveraged Buyouts on Target Firms' Competitors

SAFE Working Paper No. 99

38 Pages Posted: 13 Jan 2014 Last revised: 1 May 2015

See all articles by Marcel Grupp

Marcel Grupp

Goethe University Frankfurt

Christian Rauch

American University of Sharjah

Marc P. Umber

Frankfurt School of Finance & Management

Uwe Walz

Goethe University Frankfurt - Institute of Economics; Center For Financial Studies (CFS); Goethe University Frankfurt - Research Center SAFE

Date Written: April 30, 2015

Abstract

This paper analyzes the influence Leveraged Buyouts (LBOs) have on the operating performance of the LBO target companies’ direct competitors. A unique and hand-collected data set on LBOs in the United States in the period 1985-2009 allows us to analyze the effects different restructuring activities as part of the LBO have on the competitors’ revenues. These restructuring activities include changes to leverage, governance, or operating business, as well as M&A activities of the LBO target company. We find that although LBOs itself have a negative influence on competitors’ revenue growth, some restructuring mechanisms might actually benefit competing companies.

Keywords: Product Market Competition, Peers, LBOs, Restructuring

JEL Classification: D43, G23, G24, G34

Suggested Citation

Grupp, Marcel and Rauch, Christian and Umber, Marc P. and Walz, Uwe, The Influence of Leveraged Buyouts on Target Firms' Competitors (April 30, 2015). SAFE Working Paper No. 99 . Available at SSRN: https://ssrn.com/abstract=2377895

Marcel Grupp

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Christian Rauch (Contact Author)

American University of Sharjah ( email )

P.O. Box 26666
University City
Sharjah, Greater Dubai Area
United Arab Emirates

Marc P. Umber

Frankfurt School of Finance & Management ( email )

Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany

Uwe Walz

Goethe University Frankfurt - Institute of Economics ( email )

Postfach 81
D-60054 Frankfurt
Germany

Center For Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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