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This chapter investigates whether and to what extent tax benefits affect the likelihood of firms undertaking leveraged buyout (LBO) transactions.

With an identified sample of LBO firms and similar non-LBO counterparts, this chapter utilizes staggered changes in state corporate income tax rates as exogenous shocks and adopts a Logistic regression to analyze how these tax changes affect firms' probability of engaging in LBOs.

Firms are more likely to engage in LBOs after increases in corporate income tax rates. Specifically, the increase in the likelihood of firms undertaking LBOs following tax increases is between 6.9% and 12.9%. We also find that this positive relation is more pronounced for firms with higher levels of return on assets (ROA) and marginal tax rates (MTR). Finally, we report that the mean value of tax benefits accounts for between 28.5% and 170% of the premium paid to pre-buyout shareholders.

This chapter provides strong evidence that tax benefits constitute an important source of value creation in LBOs and adds to the debate regarding the role of tax benefits in LBOs.

Seeks to investigate whether the financial characteristics of leveraged buy‐out (LBO) targets differ from those of firms that have not undergone an LBO before the deal. Specifically, to examine the free cash flows (FCFs), income taxes, capital intensity, business risk, profitability, financial structure and asset characteristics of 175 French LBO targets that are mainly privately held and rather small companies, between 1996 and 2002.

Predictions derive from the FCF and the tax savings hypotheses, and from the criteria used by LBO firms in their acquisition rationale. Tests were conducted of differences between LBO targets and control companies and logit regressions run.

Results show that LBO targets are less indebted, have more liquid (financial) assets, and exhibit higher business risk than their industry counterparts. A distinction between LOBs according to the vendor type shows that independent companies are smaller, more profitable, and have higher tax income levels, whereas former subsidiaries or divisions of groups are less profitable, and have more financial assets than their industry counterparts. Logit regressions suggest that LBOs of smaller independent targets that LBOs of smaller independent targets fit fiscal and succession motives, whereas LBOs of former subsidiaries address management issues.

The likelihood of an LBO is related to accounting ratios only. Further research could include other financial or strategic variables in the models.

The unexpected risky profile of targets has implications for LBO firms.

A new result is the risky profile of LBO targets prior to the deal. This could help to explain the underperformance puzzle after the deal already emphasized on the French market.

The purpose of this paper is to examine the informational asymmetry (informational advantage of managers) in leveraged buyout (LBO) transactions.

Unlike previous studies of informational asymmetry in LBOs, this research uses a set of reverse‐LBO and re‐LBO firms. The paper proposes and empirically tests three hypotheses that draw on the informational advantage of managers in LBOs. Specifically, the value gain (VG) realized by the reverse‐LBO firms is compared with that realized by a control sample of firms; the wealth distribution between managers and pre‐buyout shareholders is studied; and, finally, the performance of re‐LBO firms relative to reverse‐LBO firms is evaluated.

The results do not support the view that managers use buyouts to exploit their informational advantage. Specifically; the performance of LBO firms under the private ownership is comparable to those of matching public firms; the management team's return in a LBO deal is not significantly more than pre‐buyout shareholders’ return; and repeating reverse‐LBO firms (re‐LBOs) do not necessarily perform better than the non‐repeating reverse‐LBO firms.

While reverse‐LBOs have been investigated to some extent in the prior literature, studies on re‐LBOs are quite scant – although these transactions offer a new and interesting avenue to examine the motivations behind LBOs in general. The use of the entire LBO − reverse‐LBO − re‐LBO cycle in testing the informational advantage of managers is a novelty. It is hoped that re‐LBOs will attract the amount of attention they deserve as these firms may offer interesting means to reinvestigate commonly debated theories of corporate finance.

This paper aims to investigate how the passage of the Sarbanes Oxley Act (SOX) impacted the likelihood and timing of the decision of leveraged buyout (LBO) firms to exit via initial public offering (IPO) (reverse-LBO) and the mediating effect of reputed private equity (PE) firms.

The sample comprises firms that went private via LBO between 1990 and 2018. The authors use logistic and ordinary least square regression models to compare the effect of SOX on the re-listing decision and the time taken to re-list.

LBO firms were less likely to exit via public offering after SOX, and the time from LBO to IPO was significantly longer for exiting firms post-SOX. PE firm reputation partially reversed the reluctance to exit via IPO and shortened the time to exit.

The primary focus is RLBOs; the authors do not directly examine other methods of LBO exit. The findings have policy implications for unintended impacts of SOX. Despite the benefits of increasing transparency and protecting investors, SOX reduced the likelihood of going public and increased the time to IPO, potentially reducing product market competition.

RLBOs present a unique experimental setting as the authors can test the impact of SOX on both the likelihood and time to go public, whereas prior literature using first-time IPO samples are able to test only the likelihood. The authors also show that the reputation of the advising PE firm attenuates the reluctance and time taken for RLBOs to re-list. The authors are, thus, able to provide a new perspective on the impact of SOX on the going public decision.

The purpose of this paper is to extend the research on private equity by studying the drivers of leveraged buyout (LBO) operating performance in Latin America. The authors consider a large set of candidate drivers (financial, governance, macroeconomic and industry variables) and study their effects on performance over short- and long-terms.

To conduct this study, the authors used Capital IQ as a database as well as a hand-collected data set covering LBO in Latin America from 2000 to 2008.

The empirical results show that macroeconomic variables have an important impact on LBO value creation. Governance variables show also that LBO transactions reduce information asymmetries between existing and new management teams. Consequently, a concentrated shareholder structure has a better impact on performance than diluted stockholders. Financial variables present significant effects after the delisting.

The characteristics of the debts included in the balance sheets (maturity for example) are not available in the authors' data basis. A test including this information could bring other elements of explanation. The measure of cumulative abnormal returns around going-private announcements and their impacts on shareholder’s value could also be of interest. This last study has been published for the UK (Wright et al., 2006). Further research should introduce other continents and particularly Asia in the analysis but also comparisons between the Brazil–Russia–India–China–South Africa (BRICS) countries.

This study makes five main contributions. First, the authors construct an LBO sample with emerging markets and specially Latin America. It is the first time that an academic article has been realized. Data are very difficult to obtain to do empirical tests. Latin America is a part of emerging markets, which is an interesting study subject due to their attractiveness in terms of growth of private equity funds. Second, to understand clearly how LBOs create value, the authors construct a sample control to highlight the key factors. Criteria of size, sector of activity and Standard Industrial Classification (SIC) codes were strictly enforced. Third, the authors do not focus on the moment where the transaction is realized like many studies but before and after the delisting. Indeed, they observed, on the one hand, the operating performance between year −1 and year +1 and, on the other hand, the operating performance between year −1 and year +3. Generally, only the market reaction around the acquisition announcement is examined. Post-performance is not considered due to lack of data. Fourth, the authors take into account the macroeconomic effects on performance of LBOs. It is the first examination of the impact of macroeconomic factors on performance of LBOs in Latin America. And fifth, they analyze the impact of going-private decisions on employees.

The lean blowout (LBO) limit of the combustor is one of the important performance parameters for any gas turbine combustor design. This study aims to predict the LBO limits of an in-house designed swirl stabilized 3kW can-type micro gas turbine combustor.

The experimental prediction of LBO limits was performed on 3kW swirl stabilized combustor fueled with methane for the combustor inlet velocity ranging from 1.70 m/s to 6.80 m/s. The numerical prediction of LBO limits of combustor was performed on two-dimensional axisymmetric model. The blowout limits of combustor were predicted through calculated average exit gas temperature (AEGT) method and compared with experimental predictions.

The results show that the predicted LBO equivalence ratio decreases gradually with an increase in combustor inlet velocity.

This LBO limits predictions will use to fix the operating boundary conditions of 3kW can-type micro gas turbine combustor. This methodology will be used in design stage as well as in the testing stage of the combustor.

This is a first effort to predict the LBO limits on micro gas turbine combustor through AEGT method. The maximum uncertainty in LBO limit prediction with AEGT is 6 % in comparison with experimental results.

The purpose of the study is to explore the board of directors in leveraged buyouts (LBOs) as a distinct source of value creation and to conceptually investigate the going‐private transaction via LBO as a response to deficient governance structures as well as the post‐buyout board restructuring.

The paper provides a review of the literature on LBOs boards, and relies on agency theory and the resource dependence perspective to develop testable propositions. The work suggests that the board as a particular source of efficiency gains in LBOs warrants further empirical research.

The paper gives strong credence to the argument that boards represent a unique source of value creation in LBOs. Previous agency‐theoretic work is complemented by focusing on the monitoring function of the board, but resource dependence theory introduced to suggest the importance of a strategic service and support function. The work is conceptual in nature and thus requires subsequent empirical testing to verify assertions set forth in this study.

The paper shows that incentives of managerial equity participation and the discipline of debt are gradually losing their distinctiveness in today's buyout industry. To compete in an increasingly crowded environment, LBO specialists need to identify new sources of value to generate attractive returns for their investors.

The paper extends the existing LBO literature by introducing resource dependent as a complementary framework. Given that the traditional LBO literature examines the discipline of debt and managerial ownership that explain their efficiencies, the role of LBO boards as a distinct value creation mechanism in buyouts is introduced.

In the next five years, there will be a shortage of divestiture candidates qualified for leveraged buyouts relative to the number of interested buyers and the available supply of financing. Corporations will, therefore, be well positioned to negotiate favorable terms of sale for qualified divesture candidates using this technique.

This paper aims to predict the effect of combustor inlet area ratio (CIAR) on the lean blowout limit (LBO) of a swirl stabilized can-type micro gas turbine combustor having a thermal capacity of 3 kW.

The blowout limits of the combustor were predicted predominantly from numerical simulations by using the average exit gas temperature (AEGT) method. In this method, the blowout limit is determined from characteristics of the average exit gas temperature of the combustion products for varying equivalence. The CIAR value considered in this study ranges from 0.2 to 0.4 and combustor inlet velocities range from 1.70 to 6.80 m/s.

The LBO equivalence ratio decreases gradually with an increase in inlet velocity. On the other hand, the LBO equivalence ratio decreases significantly especially at low inlet velocities with a decrease in CIAR. These results were backed by experimental results for a case of CIAR equal to 0.2.

Gas turbine combustors are vulnerable to operate on lean equivalence ratios at cruise flight to avoid high thermal stresses. A flame blowout is the main issue faced in lean operations. Based on literature and studies, the combustor lean blowout performance significantly depends on the primary zone mass flow rate. By incorporating variable area snout in the combustor will alter the primary zone mass flow rates by which the combustor will experience extended lean blowout limit characteristics.

This is a first effort to predict the lean blowout performance on the variation of combustor inlet area ratio on gas turbine combustor. This would help to extend the flame stability region for the gas turbine combustor.

Corporate takeovers have become a prominent feature of global business. Merger and acquisition activity in the United States alone climbed from $32 billion in 1980 to $300 billion in 1988, an annual rate of increase of 32 percent. The individual size of these transactions has reached an all‐time high. Any company, whatever its size, may be vulnerable as a target.