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Repeated LBOs: The Case of Multiple LBO Transactions

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Abstract

Firms that undergo a second LBO transaction are unique because they have a second experience in the capital markets after being privately held. Motivations for repeated LBOs may differ from first-time LBOs—because of the past experience, the market may be able to better distinguish the competing motivations that have been suggested in the literature. We find that for repeated LBOs, the market response is more strongly positive than that typically found for first-time LBOs. The market reaction is also strongly related to a variant of Tobin'Q, implying that the timing of the LBO may coincide with a low perception in market value. It is not surprising that the majority of the repeated LBOs were performed following the 1987 stock market crash. It appears that the instigators of the LBO believed the price was undervalued and their experience let them act accordingly.

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  • Arman Kosedag & David Michayluk, 2004. "Repeated LBOs: The Case of Multiple LBO Transactions," Published Paper Series 2004-2, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    • Handle: RePEc:uts:ppaper:2004-2
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    Cited by:

    1. James Ang & Carol Boyer, 2009. "Has the 1987 crash changed the psyche of the stock market?," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 8(2), pages 138-154, May.

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