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The Evolution of Buyout Pricing and Financial Structure in the 1980s
Abstract
We examine changes in the pricing and financial structure of large management buyouts in the 1980s. Over time, (1) buyout price to cash flow ratios rose in absolute terms (particularly in deals financed using public junk bonds); (2) required bank principal repayments accelerated, leading to sharply lower ratios of cash flow to total debt obligations; (3) private subordinated and bank debt were replaced by public junk debt; and (4) management teams and dealmakers took more money out of transactions up front. These patterns are consistent with an “overheating” phenomenon in the buyout market. Preliminary post-buyout evidence lends some support to this interpretation.
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Cited by
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Shleifer, A., & Vishny, R. W. (1997) · The Journal of Finance · doi:10.1111/j.1540-6261.1997.tb04820.x · Cited by 16,243
The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems
JENSEN, M. C. (1993) · The Journal of Finance · doi:10.2307/2329018 · Cited by 1,666
The Valuation of Cash Flow Forecasts: An Empirical Analysis
KAPLAN, S. N., & RUBACK, R. S. (1995) · The Journal of Finance · doi:10.1111/j.1540-6261.1995.tb04050.x · Cited by 512
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Metadata
- Authors
- Kaplan, S. N., & Stein, J. C.
- Venue
- The Quarterly Journal of Economics
- Publisher
- Oxford University Press (OUP)
- Published
- 1993-05-01
- Volume
- 108
- Issue
- 2
- Pages
- 313-357
- ISSN
- 0033-5533 (ISSN-L)
- 1531-4650
- OpenAlex
- W2052865346
- Cited by
- 448
- References
- 0
- FWCI
- 71.30
- Type
- journal article
- Language
- en
- Open access
- closed
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- Kaplan, S. N., & Stein, J. C. (1993). The Evolution of Buyout Pricing and Financial Structure in the 1980s. The Quarterly Journal of Economics. https://doi.org/10.2307/2118334
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
