Year of Graduation
Factors Influencing the Probability of Target Selection in LBO Deals
This study examines the factors influencing the probability of target selection in LBO deals in developed economies of three regions: Europe, US and Canada, and Asia / Pacific. Using a sample of leveraged buyouts and matched control groups of comparable companies, we found a significant relationship between the financial and operating characteristics of a company and the likelihood of LBO. The presented evidence indicates that the main driver for LBO activity is target’s excess cash flows that lead to agency problems between managers and shareholders. Moreover, the evidence justifies support for the presented hypothesis about positive impact of firm's undervaluation on going private. Of special interest is the observation that IT-companies may be prone to becoming LBO targets.