Leveraged Buyouts and Private Equity
AbstractIn a leveraged buyout, a company is acquired by a specialized investment firm using a relatively small portion of equity and a relatively large portion of outside debt financing. The leveraged buyout investment firms today refer to themselves (and are generally referred to) as private equity firms. We describe and present time series evidence on the private equity industry, considering both firms and transactions. We discuss the existing empirical evidence on the economics of the firms and transactions. We consider similarities and differences between the recent private equity wave and the wave of the 1980s. Finally, we speculate on what the evidence implies for the future of private equity.
CitationKaplan, Steven N., and Per Stromberg. 2009. "Leveraged Buyouts and Private Equity." Journal of Economic Perspectives, 23 (1): 121-46. DOI: 10.1257/jep.23.1.121
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- G24 Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies