Cross-border LBOs

• Main Authors: CAO, Jerry X., CUMMING, Douglas, QIAN, Meijun, WANG, Xiaoming
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2015
• Subjects: LBOs; Creditor rights; Private equity; Cross border; Club deal; Law and finance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/4969; https://ink.library.smu.edu.sg/context/lkcsb_research/article/5968/viewcontent/SSRN_id1086775.pdf
• Institution: Singapore Management University

This paper examines the relation between legal conditions and leveraged buyouts (LBOs) in 49 countries. The data indicate that sophisticated PE fund managers carrying out large international LBOs can only partially mitigate costs associated with inefficient legal protections. LBOs are more active in countries with strong creditor rights. Club deals are more likely to occur in countries with weak creditor rights. Cross-border LBO investment is more common from strong creditor rights countries to weak creditor rights countries. Premiums offered to shareholders are on average negatively correlated with creditor rights for both domestic and cross-border LBOs.