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Did LBOs create value in US food industries in the 1980s?

  • Francis Declerck

    (IGIA (Institut de Gestion Internationale Agro-Alimentaire), 13 Boulevard de l'Hautil, 95092 Cergy-Pontoise Cedex, France)

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    The objective of the study is to determine whether LBOs (leveraged buyouts) created value in the 1980s. LBOs existed before the 1980s but their number and dollar value increased in the 1980s. Value of LBOs in food industries peaked at US$65 billion in 1989. In dollar value, the RJR Nabisco and Beatrice Foods LBOs are the two largest leveraged buyouts in US history. A sample of target firms, taken privately in an LBO in the 1980s, was analyzed to reach the objective. Multiples of purchase price to book value at takeover announcement date were studied. Debt repayments and divestitures were analyzed. Results show that the structure of deals has changed since the 1980s. © 1995 John Wiley & Sons, Inc.

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    Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

    Volume (Year): 11 (1995)
    Issue (Month): 6 ()
    Pages: 523-536

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    Handle: RePEc:wly:agribz:v:11:y:1995:i:6:p:523-536
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    1. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 110.
    2. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
    3. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 351.
    4. Kaplan, Steven N., 1989. "Campeau's acquisition of federated : Value destroyed or value added," Journal of Financial Economics, Elsevier, vol. 25(2), pages 191-212, December.
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