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The Impact of Lbos on Investment Policies and Operations of Acquired French Firms

Author

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  • Philippe Desbrières

    (Université de Bourgogne)

  • Alain Schatt

Abstract

This paper evaluates the extent that French LBO targets' investment policy and operations can account for their overperformance discrepancy. Our empirical study has been carried out on 132 French LBOs between 1989 and 1994. The results show that the abnormal plunge in economic return cannot be explained by overinvestments or by inefficient working capital management. Nevertheless, abnormal increases in wages, supplies and/or sales price reductions appear to be prominent.

Suggested Citation

  • Philippe Desbrières & Alain Schatt, 2002. "The Impact of Lbos on Investment Policies and Operations of Acquired French Firms," Working Papers CREGO 1021002, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
    • Handle: RePEc:dij:wpfarg:1021002
    Note: version française publiée dans Finance Contrôle Stratégie, vol.5, n°4, décembre 2002.
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    References listed on IDEAS

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    1. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    2. Phillippe Desbrières & Alain Schatt, 2002. "The Impacts of LBOs on the Performance of Acquired Firms: The French Case," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(5‐6), pages 695-729.
    3. Gérard Charreaux & Philippe Desbrières, 2001. "Corporate Governance: Stakeholder Value Versus Shareholder Value," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 5(2), pages 107-128, June.
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    7. Baker, George P. & Wruck, Karen H., 1989. "Organizational changes and value creation in leveraged buyouts : The case of the O.M. Scott & Sons Company," Journal of Financial Economics, Elsevier, vol. 25(2), pages 163-190, December.
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    9. Wright, Mike & Thompson, Steve & Robbie, Ken, 1992. "Venture capital and management-led, leveraged buy-outs: A European perspective," Journal of Business Venturing, Elsevier, vol. 7(1), pages 47-71, January.
    10. Kaplan, Steven, 1989. "The effects of management buyouts on operating performance and value," Journal of Financial Economics, Elsevier, vol. 24(2), pages 217-254.
    11. Phillippe Desbrières & Alain Schatt, 2002. "The Impacts of LBOs on the Performance of Acquired Firms: The French Case," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(5‐6), pages 695-729.
    12. repec:bla:jfinan:v:44:y:1989:i:4:p:953-70 is not listed on IDEAS
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    Cited by:

    1. Troy D. Smith, 2015. "Private Equity Investment in India: Efficiency vs Expansion," Discussion Papers 15-011, Stanford Institute for Economic Policy Research.
    2. Erno Tornikoski & Christophe Bonnet & Bérangère Deschamps & Gilles Lecointre & Mickael Buffart, 2015. "Situation Analyses Business Transfer Ecosystem in France: Situation Analysis in 2015," Working Papers hal-01335664, HAL.
    3. Philippe Desbrières & Alain Schatt, 2002. "L'incidence des LBO sur la politique d'investissement et la gestion opérationnelle des firmes acquises:le cas français," Revue Finance Contrôle Stratégie, revues.org, vol. 5(4), pages 79-106, December.

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    More about this item

    Keywords

    Leveraged buy-out; performance; investment policy; operations;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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