Le rôle de la dette dans le LBO : une revue de la littérature
AbstractAfter 1985, a large number of LBO project were not able to meet their debt. Among these cases, the Federated Department Stores LBO repurchased by Campeau and the Gateway LBO repurchased by Macy's. But, the conventional view of LBO transactions is that they are designed to improve the efficiency of the firm. The question raised in this paper is the following : What makes the buyout debt so advantageous ? To answer to the question, we provide a survey of the theoretical and empirical literature based on two opposite sides : On the first side, debt is value enhancing (the agency theory, the tax savings theory, the asymmetric information theory, and the free cash flows theory). On the other side, debt creates private value captured by shareholders : The shareholders' gains come from the exploitation of financial market misevaluation, from the usage of tax benefits, and from rent expropriation from worker, suppliers and other corporate stakeholders (the transfer theory).
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Bibliographic InfoPaper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2007-8.
Length: 29 pages
Date of creation: 2007
Date of revision:
Leverage buy out; asymmetric information; debt; capital structure; free cash-flows;
Other versions of this item:
- Yousfi, Ouidad, 2007.
"Le rôle de la dette dans le LBO : une revue de la littérature
[Debt in LBO projects: survey of the literature]," MPRA Paper 28708, University Library of Munich, Germany, revised 2007.
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-30 (All new papers)
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