Le rôle de la dette dans le LBO : une revue de la littérature.

Yousfi, Ouidad (2007): Le rôle de la dette dans le LBO : une revue de la littérature. Published in: Euro-Mediterranean Economics and Finance Review , Vol. 2, No. 2 (2007): pp. 234-253.

Abstract

After 1985, a large number of LBO projects were not able to meet their debt, like for example Federated Department Stores LBO repurchased by Campeau and Gateway LBO repurchased by Macy's. But, the conventional view of LBO transactions is that they are designed to improve the efficiency of the firm. The question raised in this paper is the following : What makes the buyout debt so advantageous ? To answer this question, we provide a survey of the theoretical and empirical literature based on two opposite sides : On the first side, debt is value enhancing (the agency theory, the tax savings theory, signal theory, and the free cash flows theory). On the other side, debt creates private value captured only by new shareholders : The shareholders' gains come from the exploitation of financial market misevaluation, from the deductibility of the debt's interests, and from rent expropriation from workers, suppliers and other corporate stakeholders (the transfer theory).

• Item Type: MPRA Paper
• English Title: Debt in LBO projects: survey of the literature.
• Language: French
• Keywords: Leverage buy out, asymétrie d�information, dette, structure de capital, free cash-�flows
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance; G - Financial Economics > G2 - Financial Institutions and Services > G24 - Investment Banking ; Venture Capital ; Brokerage ; Ratings and Ratings Agencies

References

Andres C., Betzer A. et Ho¤man M., (2005), "Going private via LBO -Shareholders gains in the european markets", www.ssrn.com.

Bruton G., Keels J. et Scifres E., (2002), "Corporate restructuring and performance: An agency perspective on the complete buyout cycle", Journal of Business Research, Vol. 55, pp. 709-724.

Brush T., Bromiley P. et Hendrickx M., (1998), "The Free Cash-Flow hypothesis for sales growth and �rm performance", Strategic Management Journal, Vol. 21, N 4, pp. 455-472.

Casamatta C., (2002), "Financing and Advising : Optimal Financial Contracts with Venture Capitalists", CEPR Discussion Paper No. 3475.

Cornett M. et Travlos N., (1993), "Going Private Buyouts and determinants of shareholders�Returns", Journal of Accounting, Auditing and Finance, pp. 1-30.

Diamond D., (1984), "Financial Intermediation and Delegated Monitoring", Review of Economic Studies, Vol. 51, pp. 393-414.

Diamond D., (1993), "Seniority and maturity of debt contract", Journal of Financial Economics, n 33, pp. 341-368.

De Angelo H., De Angelo L. et Rice E., (1984a), "Going private : Minority Freezeouts and stockholder wealth", Journal of Law and Economics, Vol. 27, Octobre, pp. 35-43.

Demsetz H., (1983), "The Structure of Ownership and the Theory of the Firm", The Journal of Law and Economics, Vol. 26, pp. 134-139.

Demsetz H., et Lehn K., (1985), "The Structure of Corporate Ownership", Journal of Political Economy, Vol. 93, pp. 1155-77.

Easterwood J.et Seth A., (1993), "Strategic Restructuring in large Management Buyouts", Journal of Applied Corporate Finance, Vol.6, N° 1, pp. 25-37.

Habib M., (1997), "Monitoring, implicit contracting, and the lack of performance of leveraged buyouts", European Finance Review,26, N° 1, pp. 139-163.

Ippolito R. et James W., ( 1992), "LBOs, reversions and implicit contracts", The Journal of Finance, Vol. 47, N° 1, pp. 139-167.

Jarrell A., Brickley A. et Netter M., (1988), "The market for corporate control: The empirical evidence since 1980", Journal of Economic Perspectives, Vol. 2, 49-68.

Jensen M. et Meckling W., (1976), " Theory of the �rm: Management Behavior, Agency Costs and Ownership Structure", Journal of Financial Economics, Vol. 3, N° 4, pp. 305-360.

Jensen M., (1986), "Agency costs of free cash-�ow, corporate governance, and takeovers", American Economic Review, Vol. 76, N° 2,pp. 323-329.

Jensen M., (1989a), "Active investors , LBOs, and privatizations of bankruptcy", Journal of Applied Corporate Finance, Vol. 2, N° 1, pp. 25-44.

Jensen M., (1989b), "Eclipse of the public corporation", Harvard Business review, Septembre et Octobre.

Kaplan S., (1989a), "Management buyouts: Evidence on taxes as a source of value", The Journal of Finance, Vol. 44, N° 3, pp. 611-632.

Kaplan S., (1989b), "The e¤ects of management buyouts on operating performance and value", Journal of Financial Economics, Vol.24, pp. 217-254.

Kaplan S., (1991), " The staying power of leveraged buyouts", Journal of Financial Economics, Vol. 29, pp. 287-313.

Kaplan S., (1997), "The Evolution of U.S. Corporate Governance: We are All Henry Kravis Now", Journal of Private Equity, Vol. 1, N° 1, pp. 7-14.

Kaplan S. et Stein J., (1993), "The evolution of buyout pricing and �nancial structure en the 1980s", The Quarterly Journal of Economics, Mai, pp. 313-357.

Kim S. et Lyn O., (1991), "Going private: Corporate restructuring under information asymmetry and agency problems", Jounal of business �nance & accounting, Vol. 18, pp. 637-648.

Leland E. et Pyle H., (1977), "Informational asymmetries, Financial structure, and the Financial Intermediation", Journal of Finance, N° 32, pp. 371-387.

Lehn K. et Poulsen A., (1989), "Free cash �ow and stockholde gains in going private transactions", The Journal of Finance, Vol. 44, N°3, pp.771-787.

LewellenW. et Roden D., (2000), "After the buyout, the long view", Advances in Financial Economics, Vol. 5, pp. 185-206.

Litchtenberg F. et Siegel D., (1990), "The effects of leveraged buyouts on productivity and related aspects of �firm behavior", Journal of Financial Economics, Vol. 27, pp.165-194.

Long W. et Ravenscraft D. J., (1993), "The �financial performance of whole company LBOs", Center for Economic Studies of Washington, CES 93-16, www.sss.com.

Miller, M., (1977), "Debt and Taxes", The Journal of Finance, Vol.32, pp. 261-275.

Modiglliani F. et Miller M., (1958), "The costs of capital, corporation �nance and the theory of investment", The American Economic Review, Vol. 48, N° 3, pp. 261-297.

Modigliani F. et Miller M., (1963), "Corporate income taxes and the cost of capital: A correction", The American Economic review,Vol. 53, N° 3, pp. 433-443.

Muscarella C. et Vetsuypens M., (1990), "Efficiency and organizational structure: Study of reverse LBOs", The Journal of Finance, Vol. 45, N° 5, pp. 1389-1413.

Meyers S., (1977), "Determinants of corporate borrowing", Journal of Financial Economics, n° 5, pp. 147-175.

Myers S. et Majluf N., (1984), "Corporate �nancing and investment decisions when �rms have information that investors do not have", Journal of Financial Economics , Vol. 13, N° 2, pp. 187-221.

Opler T. et Titman S., (1993), The determinants of leveraged buyout activity: Free cash �ow versus �nancial distress costs", The Journal of Finance, Vol. 48, N° 5, pp. 1985-2002.

Phan P. et Hill C., (1995), "Organizational restructuring and economic performnace in leveraged buyouts: An ex post study", Academic of Management Journal, Vol. 38, N° 3, pp. 704-739.

Ross S., (1977), "The determination of �nancial structure: the incentive-signalling approach", Bell Journal of Economics, p. 23-40.

Servaes H., (1994), "Do Takeover targets Overinvest?", the Review of Financial Studies, Vol. 7, N° 2, pp. 253-277.

Shleifer A. et , Summers L., (1989), "Breach of Trust in Hostile Takeovers", NBR working paper series, Mai, N° 2342.

Shleifer A. et Vishny R. (1988), "Management buyouts as a response to market pressure", Mergers and acquisitions, edité par Alan J. Auerbach, The University of Chicago Press, pp. 87-102.

Stulz R., (1990), "Managerial Discretion and Optimal Financing Policies", Journal of Financial Economics, Vol. 26, pp. 3-27.

Warga A. et Welch I., (1993), "Bondholder losses in leveraged buyouts", Review of �nancial studies, Vol. 6, pp. 959-982.