Date of Award
Bachelor of Business Honours
School of Business
This study comprehensively reviews theoretical and empirical literature pertaining to leveraged buyouts. An agency theory framework best describes the source of LBO value creation. Agency conflicts are mitigated through extensive utilisation of debt capital and concentrated equity ownership, which are functions of asset and organisation structures. The evidence generally supports the hypothesis that economic wealth is created by leveraged buyouts, rather than merely redistributed among stakeholders. This thesis uses a multiple case design to examine leveraged buyouts in Australia. It compiles data from a broad range of public and private sources, and conducts qualitative and quantitative analysis on six (6) leveraged buyouts. Case results indicate that industry and business attributes synonymous with US and UK buyouts are important determinants of Australian leveraged buyouts. Business attributes are the primary motivating farces. Ownership structures comply with foreign expectations, and capital structures are more closely aligned with those reported in UK research. Industry adjusted performance was analysed for a subset of three (3) leveraged buyouts with post-buyout periods of sufficient duration. Profit margins and capital utilisation exceeded industry medians in each post-buyout year, for each leveraged buyout. Cost control, rather than increased sales, accounted for most gains. Australian buyouts did not manage working capital effectively, a result which contrasts markedly with US and UK leveraged buyouts. The evidence from the Australian leveraged buyouts analysed in this thesis is consistent with an agency theory framework.
Smith, K. J. (1992). Leveraged Buyouts. Retrieved from http://ro.ecu.edu.au/theses_hons/254