When Lbos Go Ipo

Ainina, M. Fall; Mohan, Nancy

doi:10.1111/j.1468-5957.1991.tb00602.x

Cited by 5 publications

(5 citation statements)

References 12 publications

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“…second LBO and its reversal). This conjecture is in line with Ainina and Mohan (1991) who view the whole cycle as the revolving door policy. Accordingly, we predict that the re‐LBO firms are the best performers among the reverse‐LBO firms in the first private to public round.…”

Section: Testable Hypothesessupporting

confidence: 85%

“…For example, Mohan (1990) notes that the management of Calton converted an initial investment of $4.6 million into $71.4 million only in one‐and‐a‐half years. Similarly, Ainina and Mohan (1991) report a 521 percent increase in the market value of Leslie Fay between the LBO and the reverse‐LBO (or secondary initial public offering, SIPO) date. Similar cases can also be found in the financial press.…”

Section: Introductionmentioning

confidence: 99%

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Reverse‐LBOs, re‐LBOs and informational asymmetry hypothesis of LBO transactions

2009

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PurposeThe purpose of this paper is to examine the informational asymmetry (informational advantage of managers) in leveraged buyout (LBO) transactions.Design/methodology/approachUnlike previous studies of informational asymmetry in LBOs, this research uses a set of reverse‐LBO and re‐LBO firms. The paper proposes and empirically tests three hypotheses that draw on the informational advantage of managers in LBOs. Specifically, the value gain (VG) realized by the reverse‐LBO firms is compared with that realized by a control sample of firms; the wealth distribution between managers and pre‐buyout shareholders is studied; and, finally, the performance of re‐LBO firms relative to reverse‐LBO firms is evaluated.FindingsThe results do not support the view that managers use buyouts to exploit their informational advantage. Specifically; the performance of LBO firms under the private ownership is comparable to those of matching public firms; the management team's return in a LBO deal is not significantly more than pre‐buyout shareholders’ return; and repeating reverse‐LBO firms (re‐LBOs) do not necessarily perform better than the non‐repeating reverse‐LBO firms.Originality/valueWhile reverse‐LBOs have been investigated to some extent in the prior literature, studies on re‐LBOs are quite scant – although these transactions offer a new and interesting avenue to examine the motivations behind LBOs in general. The use of the entire LBO − reverse‐LBO − re‐LBO cycle in testing the informational advantage of managers is a novelty. It is hoped that re‐LBOs will attract the amount of attention they deserve as these firms may offer interesting means to reinvestigate commonly debated theories of corporate finance.

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Section: Testable Hypothesessupporting

confidence: 85%

Section: Introductionmentioning

confidence: 99%

Reverse‐LBOs, re‐LBOs and informational asymmetry hypothesis of LBO transactions

2009

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“…NOTES 1 See Muscarella andVetsuypens (1989 and1990), Ainina and Mohan (1991), DeGeorge and Zeckhauser (1993) and Holthausen and Larcker (1996). 2 The bootstrap algorithm randomly (with replacements) picks a fixed number of observations from the original sample.`By repeating this random sampling procedure, the bootstrap can approximate the unknown true distribution of the estimator with the empirical``bootstrap'' distribution' (Jeong and Maddala, 1993).…”

Section: Discussionmentioning

confidence: 99%

Is it Free Cash Flow, Tax Savings, or Neither?An Empirical Confirmation of Two Leading Going‐private Explanations:The Case of ReLBOs

Kösedağ

Lane

2002

Business Fin & Account

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Firms which 'go private' via a leveraged buyout (LBO) retain the option to 'go public' again, a process known as a reverse LBO transaction. This paper examines the rarer phenomenon of reLBOs; that is, the practice of going private via leveraged buyout, reobtaining public status through a new initial public offering, and then going private a second time. Among the several alternative hypotheses explaining LBOs, we focus on two prominent ones - free cash flow and tax savings - to explain reLBOs. With a sample of 21 reLBO firms, we find no empirical support for the free cash flow hypothesis but detect a significant relationship between the decision to go private for the second time and the tax savings potential of the firm. Copyright Blackwell Publishers Ltd 2002.

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“…The findings also show that the decision to go public may be partially motivated by the desire of active institutional investors (LBOs' backers) to divest their stakes in these LBOs via takeover. Ainina and Mohan (1991) examined the initial performance of 92 LBO companies which returned to public ownership and a matching sample of similar companies which were not previously LBOs. Two opposing hypotheses are tested; the information asymmetry (referred to as the reduced uncertainty hypothesis) and the repeat placement hypothesis.…”

Section: Theoretical Rackground and Previous Researchmentioning

confidence: 99%

“…Consequently, the MBO-IPOs are likely to be less under-priced. Ainina and Mohan (1991) refer to this information asymmetry as the 'Reduced Uncertainty Hypothesis'. Muscarella and Vetsuypens ( 1989) and DeGeorge and Zeckhauzer ( 1993) test the difference in the degree of uncertainty between reverse LBOs and other general IPOs in the context ofinformation asymmetry.…”

Section: 04mentioning

confidence: 99%

UNSEASONED EQUITY OFFERINGS MBO‐IPOs vs NON‐MBO‐IPOs

Saadouni

Briston

Mallin

1996

Business Fin & Account

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In this paper we examine the degree of under‐pricing of two different types of unseasoned equity offerings (IPOs), namely MBO‐IPOs and non‐MBO‐IPOs. Since, MBO‐IPOs were previously subsidiaries or divisions of publicly listed companies which were taken private by a group of managers and then reverted back to public ownership; there should be a lower level of information asymmetry between the market on the one hand and the company and its underwriters on the other. Thus, if under‐pricing is mainly the result of uncertainty about the market value of the issuing firm, the information asymmetry hypothesis would predict that, compared with the non‐MBO‐IPOs, MBO‐IPOs should exhibit a significantly lower degree of under‐pricing. The results show that MBO‐IPOs are less under‐priced than non‐MBO‐IPOs. However, the difference is not statistically significant.

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When Lbos Go Ipo

Cited by 5 publications

References 12 publications

Reverse‐LBOs, re‐LBOs and informational asymmetry hypothesis of LBO transactions

Reverse‐LBOs, re‐LBOs and informational asymmetry hypothesis of LBO transactions

Is it Free Cash Flow, Tax Savings, or Neither?An Empirical Confirmation of Two Leading Going‐private Explanations:The Case of ReLBOs

UNSEASONED EQUITY OFFERINGS MBO‐IPOs vs NON‐MBO‐IPOs

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