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The wealth effects of public-to-private LBOs: Evidence from Europe

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  • Dasilas, Apostolos
  • Grose, Chris

Abstract

This study examines various features of leveraged public-to-private institutional buyouts in Europe that occurred between 1998 and 2016. We find significant excess returns of about 7.7% on the LBO announcement date. We also find evidence that LBOs harbored in countries with strong corporate governance mechanisms elicit greater wealth effects for shareholders of targets. Consistent with the free cash flow hypothesis, abundance of cash appears to be one of the driving forces of excess short-term returns. Looking at the characteristics of LBO targets, we show that mature companies with excess cash flows and less volatility seem to be candidates for LBO deals.

Suggested Citation

  • Dasilas, Apostolos & Grose, Chris, 2018. "The wealth effects of public-to-private LBOs: Evidence from Europe," International Review of Financial Analysis, Elsevier, vol. 58(C), pages 179-194.
    • Handle: RePEc:eee:finana:v:58:y:2018:i:c:p:179-194
    DOI: 10.1016/j.irfa.2017.10.002
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    More about this item

    Keywords

    LBOs; Public-to-private; Wealth effects; Corporate governance; Propensity score matching; Institutional buyouts;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • 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

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