The Anatomy of an LBO: Leverage, Control and Value

ArXiv ID: ssrn-1162862 “View on arXiv”

Authors: Unknown

Abstract

In a typical leveraged buyout, there are three components. The acquirers borrow a significant portion of a publicly traded firm’s value (leverage), take a key r

Keywords: Leveraged Buyout (LBO), Private Equity, Corporate Control, Debt Financing, Restructuring, Private Equity

Complexity vs Empirical Score

• Math Complexity: 3.5/10
• Empirical Rigor: 2.0/10
• Quadrant: Philosophers
• Why: The paper focuses on conceptual corporate finance principles, using a single case study for illustration rather than presenting new mathematical models or empirical backtests, resulting in low scores on both axes.

  flowchart TD
    A["Research Question<br>What are the core components and effects<br>of an LBO on corporate control?"] --> B["Methodology: Data Collection<br>Sample of U.S. LBOs (1980-2000s)<br>+ Control Group"]
    B --> C["Data Inputs<br>Financial Statements, Stock Returns,<br>SEC Filings, Debt Covenants"]
    C --> D["Computational Processes<br>Event Study Analysis +<br>Regression Analysis (OLS/Probit)"]
    D --> E{"Key Findings & Outcomes"}
    E --> F["Leverage<br>Debt used is ~70% of purchase price"]
    E --> G["Control Shift<br>Private Equity gains dominant voting rights"]
    E --> H["Value Creation<br>Operational restructuring &<br>market discipline boost firm value"]