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Louise Scholes
Louise
Scholes
Mike Wright
Mike
Wright
Leveraged buyouts and recession
Loughborough University
2017
Recession
Buyouts
Capitalism
2017-07-26 08:55:17
Chapter
https://repository.lboro.ac.uk/articles/chapter/Leveraged_buyouts_and_recession/9465680
• After unprecedented levels of deal activity in 2007, the descent into recession in 2008 has presented
both challenges and opportunities for the buyout and private equity market.
• We will likely see higher failure rates of buyouts as a consequence of highly leveraged transactions
running into difficulties.
• Private equity-backed and larger buyouts appear less likely to fail than other buyouts. Secured
creditors on average recover about 60% of their loans in failed buyouts.
• The increase in general business failure associated with recession introduces opportunities for buyouts
to rescue and turn around these failing firms, with retail sector deals especially prevalent in recent
years.
• Private equity firms can take advantage of the increased supply of failing firms provided that they have
the necessary means (financial and management skills) to turn the businesses around.
• Private equity firms have been less in active in recent years in buying failed firms, though there have
been some significant transactions.
• Buyouts of failed firms are disproportionately more likely to fail again than buyouts from other vendor
sources.