TY  - JOUR
AU  - Kaplan,Steven N.
AU  - Stein,Jeremy C.
TI  - The Evolution of Buyout Pricing and Financial Structure
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3695
PY  - 1993
Y2  - December 1993
UR  - http://www.nber.org/papers/w3695
L1  - http://www.nber.org/papers/w3695.pdf
N1  - Author contact info:
Steven N. Kaplan
Booth School of Business
The University of Chicago
5807 South Woodlawn Avenue
Chicago, IL 60637
Tel: 773/702-4513
Fax: 773/702-0458
E-Mail: steven.kaplan@chicagobooth.edu

Jeremy C. Stein
Federal Reserve Board of Governors
20th Street and Constitution Ave., N.W.
Washington, DC 20551
E-Mail: jeremy.c.stein@frb.gov
M2  - featured in NBER digest on 1991-11-07
AB  - This paper presents evidence on systematic changes in the pricing and financial structure of 124 large management buyouts completed between 1980 and 1989. We find that over tine (1) prices increased relative to current cash flows with no accompanying decrease in risk or increase in projected future cash flows; (2) required bank principal repayments accelerated, leading to sharply lower ratios of cash flow to total debt obligations; (3) private subordinated debt was replaced by public debt while the use of strip-financing techniques declined; and (4) management teams invested a smaller fraction of their net worth in post-buyout equity. These patterns of buyout prices and structures suggest that based on ex ante data, one could have expected lower returns and more frequent financial distress in later buyouts. Preliminary post-buyout evidence is consistent with this interpretation.
ER  -