Leveraged Buyouts: An Overview of the Literature

This paper provides an exhaustive literature review of the motives for public-to-private LBO transactions. First, the paper develops the the oretical framework for the potential sources of val ue creation from going private: a distinction is made between the reduction in shareholder-related agency costs, stakeholder wealth transfers, tax benefits, transac tion osts savings, takeover defense strategies, an d corporate undervaluation. The paper then reviews and summariz es how these theories have been empirically verifie d n the four different strands of literature in LBO res earch. These strands of literature are categorized by phase in the LBO transaction: Intent (of a buyout), Impact ( of the LBO on the various stakeholders), Process (o f restructuring after the leveraged buyout) and Durat ion (of retaining the private status). Then, the pa per shows that in the first half of the 2000s, a public-to-pr ivate LBO wave re-emerged in the US, UK and Contine tal Europe, whose value vastly exceeds that of the 1980 s US LBO wave. Finally, the paper provides suggesti on for further research.