Working Paper: NBER ID: w12626
Authors: Jerry Cao; Josh Lerner
Abstract: 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.
Keywords: No keywords provided
JEL Codes: G23; G24; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| RLBOS (R50) | stock performance (G12) |
| size of buyout group (G34) | RLBOS performance (R50) |
| backing by private equity firms (G34) | RLBOS performance (R50) |
| quick flips (Y60) | long-term performance (L25) |
| timing of IPO (G24) | stock performance (G12) |
| market conditions (P42) | stock performance (G12) |