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What drives leverage in leveraged buyouts? An analysis of European LBOS' capital structure

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Author Info

  • Brinkhuis, S
  • De Maeseneire, W.

    (Vlerick Leuven Gent Management School)

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    Abstract

    This paper examines leverage in European private equity led LBOs. We use a unique, self-constructed sample of 126 European private equity (PE) sponsored buyouts completed between June 2000 and June 2007. We find that determinants derived from classical capital structure theories do not explain leverage in LBOs, while they do drive leverage in a control group of comparable public firms. Rather, we document that leverage levels in LBOs are related to the prevailing conditions in the debt market. In addition, our results indicate that reputed private equity sponsors use more debt and that secondary buyouts have higher leverage levels.

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    File URL: http://www.vlerick.com/en/12652-VLK/version/default/part/AttachmentData/data/vlgms-wp-2009-31.pdf
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    Bibliographic Info

    Paper provided by Vlerick Leuven Gent Management School in its series Vlerick Leuven Gent Management School Working Paper Series with number 2009-31.

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    Length: 55 pages
    Date of creation: 05 Mar 2010
    Date of revision:
    Handle: RePEc:vlg:vlgwps:2009-31

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    Related research

    Keywords: leverage; capital structure; buyouts; LBO; financial flexibility;

    This paper has been announced in the following NEP Reports:

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