Lifting the Veil on Reverse Leveraged Buyouts: What Happens During the Private Period?. Issue 4 (14th May 2013)

• Record Type: Journal Article
• Authors: Datta, Sudip; Gruskin, Mark; Iskandar‐Datta, Mai
• Is Part Of: Financial management. Volume 42:Issue 4(2013:Winter)
• Page Start: 815
• Page End: 842
• Publication Date: 2013-05-14
• Subjects: Corporations -- Finance -- Periodicals; 658.1505
• DOI: 10.1111/fima.12023
• Languages: English
• ISSNs: 0046-3892

Abstract

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.