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The wealth effects of public-to-private LBOs: Evidence from Europe

Apostolos Dasilas and Chris Grose

International Review of Financial Analysis, 2018, vol. 58, issue C, 179-194

Abstract: This study examines various features of leveraged public-to-private institutional buyouts in Europe that occurred between 1998 and 2016. We find significant excess returns of about 7.7% on the LBO announcement date. We also find evidence that LBOs harbored in countries with strong corporate governance mechanisms elicit greater wealth effects for shareholders of targets. Consistent with the free cash flow hypothesis, abundance of cash appears to be one of the driving forces of excess short-term returns. Looking at the characteristics of LBO targets, we show that mature companies with excess cash flows and less volatility seem to be candidates for LBO deals.

Keywords: LBOs; Public-to-private; Wealth effects; Corporate governance; Propensity score matching; Institutional buyouts (search for similar items in EconPapers)
JEL-codes: G24 G32 G34 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:finana:v:58:y:2018:i:c:p:179-194