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What drives leverage in leveraged buyouts? An analysis of European leveraged buyouts’ capital structure
Author(s) -
De Maeseneire Wouter,
Brinkhuis Samantha
Publication year - 2012
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.2011.00431.x
Subject(s) - leveraged buyout , private equity , leverage (statistics) , private equity firm , capital structure , debt , business , equity (law) , financial system , monetary economics , finance , economics , machine learning , computer science , political science , law
This paper examines leverage in European private equity‐led leveraged buyouts (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.