Date of Award

6-2013

Document Type

Union College Only

Degree Name

Bachelor of Arts

Department

Economics

First Advisor

Bradley Lewis

Language

English

Keywords

equity, finance, assets, capital, LBO

Abstract

Private equity firms have become an integral piece of the financial services industry and global economy over the last thirty years. Private equity firms acquire their assets through a variety of transactions, the most common being a leveraged buyout (LBO). This paper seeks to analyze changes in global LBO activity, factors which influence LBO activity, and “staying power” or longevity of LBO transactions. The leveraged buyout market has evolved tremendously since Jensen (1989) predicted LBOs would be the “The Eclipse of the Public Corporation”. This paper looks to build off Stromberg (2008), which examined success rates of LBO exits and the “staying power” of leveraged buyouts. The paper also aims to reaffirm the Ambrose (1992) findings that an “Industry Effect” does not exist. This paper will differ from past work in that it seeks to identify how capital markets conditions influence leverage buyout activity. This paper shall produce three key findings. First, it will shed light on how the 2007 financial crisis has influenced LBO activity. Second, it will show the relationship between the health of capital markets and LBO activity. Lastly, it will reaffirm that leverage buyouts are driven by firm specific factors as opposed to an “industry effect.”

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