The Performance of Reverse Leveraged Buyouts
Reverse leveraged buyouts (RLBOs) have received increased public scrutiny but attracted little systematic study. We collect a comprehensive sample of 496 RLBOs between 1980 and 2002 and examine three- and five-year stock performance of these offerings. RLBOs appear to consistently outperform other IPOs and the stock market as a whole, with economically and statistically meaningful positive returns. There is no evidence of a deterioration of returns over time, despite the growth of the buyout market: RLBOs performed strongly in the late 1980s, the mid-1990s, and the 2000s. Large RLBOs that are backed by private equity firms with more capital under management perform better. We also find the so-called quick flips--when private equity firms sell off an investment within a year after acquisition--underperform.
Chris Allen and Lauren Walker provided excellent research support. We thank Harvard Business Schools' Division of Research and a private equity investor for research support. Edie Hotchkiss, Ludovic Phalippou, and Per Stromberg provided helpful comments. All opinions, errors, and omissions, though, are solely attributable to the authors. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Cao, Jerry & Lerner, Josh, 2009. "The performance of reverse leveraged buyouts," Journal of Financial Economics, Elsevier, vol. 91(2), pages 139-157, February. citation courtesy of