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Private Equity Institute

Private Equity Institute

Leverage

Borrow cheap, buy high?

Ulf Axelson
Tim Jenkinson, Per Stromberg, Michael S. Weisbach
Private equity funds pay particular attention to capital structure when executing leveraged buyouts, creating an interesting setting for examining capital structure theories.

Who benefits from the leverage in LBOs?

Tim Jenkinson
Rüdiger Stucke
Tax savings associated with increased levels of debt are often thought to be an important source of returns for private equity funds conducting leveraged buyouts (LBOs). However, as leverage is available to all bidders, the vendors may appropriate any benefits in the form of the takeover premium.
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