Going Private Via Lbo - Shareholder Gains in the European Market

This paper investigates market reactions after Leveraged Buyout (LBO) announcements in the European market using a data set from 1996-2002. For 99 announcements we document an average abnormal return of 27.01% over the event period [-30;+30]. The results of our cross-sectional regressions reveal that European companies with a poor stock performance before the buyout, as well as companies who are undervalued with respect to their industry peer group, tend to have higher abnormal returns. Furthermore, companies with a high pre-LBO free float and relatively weak monitoring by shareholders tend to show high abnormal LBO returns. These findings support the hypothesis that Corporate Governance standards in Europe are less rigorously enforced than in the US.