Value Creation in Leveraged Buyouts Review

Let me get it out of the way that this textbook is both fairly academic and relatively old. It is effectively a research collection from 2006, which includes an analysis of factors driving leveraged buyout (LBO) success across the market, managers, and strategies.

The age of the book is important for at least two reasons. The first is that there have been two major adverse economic regimes (2007 financial crisis and 2020 with COVID or 'Black Monday'), in addition to other smaller crises such as the 2009 European debt crisis. Significant economic downturns almost always shake things up significantly, including the relationships among variables that would be reliable under otherwise normal conditions. The second is that the landscape has evolved considerably since the release of this material; private equity has become more transparent (albeit still relatively opaque), deal sourcing has evolved, and regulations have changed significantly, for example.

With that in mind, the book delivers some very interesting insights drawn from the research conducted on the success of LBOs. LBOs are effectively debt-financed acquisitions, and the focus is to add value through a number of mechanisms, such as capital structure modification and business process transformation.

Some of the findings are unsurprising: education of management is significantly correlated with improved LBO returns, buyout success depends on vintage year, IPO exits deliver the highest returns, and so on. However, some of the findings feel very surprising to read: business and engineering degrees adversely affect returns, within the context of a team bachelor's degree graduates outperformed master degree graduates, and returns don't appear to depend on geography (at least within the period 1980-2001).

Anyways, obviously most people should not read this book given its density and specificity. However, I think some of the insights from the data are very interesting and some select people may want to read Value Creation in Leveraged Buyouts for that reason.

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