Factors Influencing Price of LBO Deals

The present research is focused on LBO (Leveraged buyout) deals, making an emphasis on factors which influence the price of target company in this type of deals. One of the most critical issues regarding any M&A deal is the problem of price setting during the first stages of deal. This issue is of especial significance when it comes to LBO deals since the fact of this activity's complexity on the one hand and lack of academic consideration on the other hand. The problem is vital to be investigated because it is expected, that economic growth in the future will lead to the growth in the LBO market. Therefore, the aim of this research is establishing factors influencing price of a target company in LBO deals. To achieve that, a regression analysis is completed, using the sample of 98 deals from 2000 to 2015. As a result, 6 factors were revealed to be significant in pricing of LBO deals: Equity; Average Cash Flow; Dividend Payment; Period of deal (in the case of this work the years before 2007 financial crisis are significant); USA residence; UK residence.