What Drives Leverage in Leveraged Buyouts? An Analysis of European LBOs' Capital Structure
De Maeseneire, Wouter Brinkhuis, Samantha
De Maeseneire, Wouter
Brinkhuis, Samantha
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Publication Type
Journal article with impact factor
Editor
Supervisor
Publication Year
2012
Journal
Accounting and Finance
Book
Publication Volume
52
Publication Issue
October (supplement)
Publication Begin page
155
Publication End page
182
Publication NUmber of pages
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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 sponsored buyouts completed between June 2000 and June 2007. We find that leverage determinants derived from classical capital structure theories do not explain leverage in LBOs, while these determinants 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 support the hypothesis that the reputation of the private equity sponsor involved in the buyout is positively related to LBO leverage. Finally, also the type of buyout (primary versus secondary) is related to the amount of leverage used.
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Keywords
Corporate Finance, Mergers & Acquisitions, Buyouts