Lifting the Veil on reverse leveraged buyouts: What happens during the private period?

Sudip Datta, Mark Gruskin, Mai Iskandar-Datta

Research output: Contribution to journalArticle

1 Scopus citations

Abstract

We document the different types of restructuring activities undertaken during the private period after the reverse leveraged buyout (RLBO) of previously public firms. Preceding the LBO, firm leverage significantly exceeds that of their peers, while their profitability is better than the industry. However, despite their superior performance, these firms are undervalued before going private. While private firms undertake value-enhancement measures by increasing employee productivity, asset restructuring, decreasing cost of goods sold, and increasing ownership concentration. Enhanced valuation at the RLBO is a result of value capture, as well as efficiencies obtained from restructuring activities. We also identify factors determining the private period duration.

Original languageEnglish (US)
Pages (from-to)815-842
Number of pages28
JournalFinancial Management
Volume42
Issue number4
DOIs
StatePublished - Dec 1 2013

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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