Is it Free Cash Flow, Tax Savings, or Neither?An Empirical Confirmation of Two Leading Going‐private Explanations:The Case of ReLBOs
Arman Kosedag and
William R. Lane
Journal of Business Finance & Accounting, 2002, vol. 29, issue 1‐2, 257-271
Firms which ‘go private’ via a leveraged buyout (LBO) retain the option to ‘go public’ again, a process known as a reverse LBO transaction. This paper examines the rarer phenomenon of reLBOs; that is, the practice of going private via leveraged buyout, reobtaining public status through a new initial public offering, and then going private a second time. Among the several alternative hypotheses explaining LBOs, we focus on two prominent ones – free cash flow and tax savings – to explain reLBOs. With a sample of 21 reLBO firms, we find no empirical support for the free cash flow hypothesis but detect a significant relationship between the decision to go private for the second time and the tax savings potential of the firm.
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jbfnac:v:29:y:2002:i:1-2:p:257-271
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