Value creation in successful LBOs

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The empirical research presented is distinctive, featuring a comprehensive database of successful LBO transactions in the European market from 1993 to 2004. This database includes detailed descriptive statistics, purchase and disposal prices, interim cash flows, and capital structure information. The novelty and depth of this data allow for an unprecedented analysis of realized rates of return at the individual transaction level, focusing on the various components and sources of these returns. The successful LBO transactions analyzed yielded significant returns for buy-out firms, while failed and unrealized investments are not the focus of this study. Instead, the research aims to uncover lessons for buy-out firms and their investors from these successful transactions. Daniel Pindur addresses this by developing an economic model of buy-out firms that dissects the economic success of realized investments, serving as a framework to identify the factors driving these components. The empirical findings highlight the magnitude of these components and their contributions to the economic success of the transactions, emphasizing the critical role of operational improvements in achieving these results.