Le rôle de la dette dans le LBO: une revue de la littérature

Debt in LBO projects: survey of the literature

Ouidad Yousfi ()

MPRA Paper from University Library of Munich, Germany

Abstract: After 1985, a large number of LBO projects were not able to meet their debt, like for example Federated Department Stores LBO repurchased by Campeau and Gateway LBO repurchased by Macy's. But, the conventional view of LBO transactions is that they are designed to improve the efficiency of the firm. The question raised in this paper is the following : What makes the buyout debt so advantageous ? To answer this question, we provide a survey of the theoretical and empirical literature based on two opposite sides : On the first side, debt is value enhancing (the agency theory, the tax savings theory, signal theory, and the free cash flows theory). On the other side, debt creates private value captured only by new shareholders : The shareholders' gains come from the exploitation of financial market misevaluation, from the deductibility of the debt's interests, and from rent expropriation from workers, suppliers and other corporate stakeholders (the transfer theory).

Keywords: Leverage buy out; asymétrie d�information; dette; structure de capital; free cash-�flows (search for similar items in EconPapers)
JEL-codes: G24 G34 (search for similar items in EconPapers)
Date: 2007, Revised 2007
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Published in Euro-Mediterranean Economics and Finance Review 2.2(2007): pp. 234-253

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Working Paper: Le rôle de la dette dans le LBO: une revue de la littérature (2007)
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