Leveraged Buyout Activity: A Tale of Developed and Developing Economies

Lloyd Blenman and Nischala Reddy

Journal of Financial Management, Markets and Institutions, 2014, issue 2, 157-184

Abstract: Returns on LBOs are on average higher for developed economies. However, returns of LBOs during high economic growth periods are high for developing economies relative to developed economies. Onthe other hand returns in developing nations are lower when compared to the returns in developed nations in periods of negative economic growth. Developing countries are more unstable relative to developedcountries during conditions of boom as well as collapse. Exit times for LBO transactions in developing economies are therefore shorter relative to developed economies in periods of high positive (negative) economic growth rate. During periods of negative economic growth rate, LBOs in developing economies exit sooner. In periodsof low or medium economic growth, LBOs in developing economies take longer to exit. Reputed firms and small firms have higher returns and exit sooner. Club deals have higher returns and exit sooner whencompared with single PE firm deals. Club deals in developing economies are on average not profitable and exit sooner

Keywords: LBOs, Returns, Reputed, Developing Economies, Uncertainty, Business Cycle, Exit Times; JEL Codes: F21; F44; G3; G15; G24 (search for similar items in EconPapers)
Date: 2014
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