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  • Thumbnail for What determines leverage in leveraged buyouts? An examination of U.S. LBO's and capital structure
    What determines leverage in leveraged buyouts? An examination of U.S. LBO's and capital structure by Paul, Taylor Andrew

    This paper examines leverage in United States private equity led LBOs. The dataset used is a unique, self-constructed sample of 45 United States private equity sponsored buyouts completed between 2006 and 2014. Through a series of regressions, I find that classical capital structure theories and debt market liquidity do not explain leverage in LBO’s. Due to limitations the data set that I constructed proved to be not large enough to come to any significant conclusions. The only significant variable that determines leverage multiples in U.S. LBO’s is the ratio of fixed assets to total assets. This thesis finds that the signs and coefficients are similar to previous empirical research, but they are all insignificant in terms of the regression analysis. It could be concluded that there are too many variables and external factors that determine the leverage multiple in leverage buyouts.