The Financing of Large Buyouts: An Empirical Analysis

47 Pages Posted: 17 Mar 2007

See all articles by Ulf Axelson

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)

Per Strömberg

Swedish House of Finance

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

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

JEL Classification: G32,G33,G34

Suggested Citation

Axelson, Ulf and Jenkinson, Tim and Stromberg, Per and Weisbach, Michael S., The Financing of Large Buyouts: An Empirical Analysis. AFA 2008 New Orleans Meetings Paper. Available at SSRN: https://ssrn.com/abstract=973835 or http://dx.doi.org/10.2139/ssrn.973835

Ulf Axelson

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

Per Stromberg

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Michael S. Weisbach (Contact Author)

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

European Corporate Governance Institute (ECGI) ( email )

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

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