Private Equity: The Long-Run Impact of Reverse Leveraged Buyouts on Portfolio Companies
Description
Reverse leveraged buyouts (RLBOs) are a common practice for private equity firms across the globe and have been on the receiving end of public scrutiny. While the performance of RLBOs has been studied in the past, very few if any works have been published concerning the specific results of reverse leveraged buyout transactions performed by the largest private equity mega-funds specifically. We collected a dataset of 22 transactions and conducted quantitative and qualitative analysis on 18 of the aforementioned transactions in order to determine the magnitude of positive effects that RLBOs had on each company. Less than half of mega-fund RLBOs that had an initial public offerings outperformed the Dow Jones Industrial Average on a compound annual growth (CAGR) basis, post-exit. Even less outperformed the S&P 500 index, and substantially less than that outperformed industry averages. It can clearly be seen that while averages dictate that large scale RLBOs do not seem profitable, there is a noticeable disparity between the success and failure of each deal when looking at price performance. This data makes the argument that while RLBOs are difficult to make successful, if the market receives them well then they can be some of the highest returning transactions.
Date Created
The date the item was original created (prior to any relationship with the ASU Digital Repositories.)
2016-05
Agent
- Co-author: Kaye, Steven
- Co-author: Chavez, Aaron
- Thesis director: Aragon, George
- Committee member: Stein, Luke
- Contributor (ctb): Department of Finance
- Contributor (ctb): Barrett, The Honors College