IPO Timing, Buyout Sponsors’ Exit Strategies, and Firm Performance of RLBOs

2011/03/29 by Jerry X. Cao, Jerry Cao
Business, Management and Accounting · Economics, Econometrics and Finance · #Private Equity and Venture Capital #Corporate Finance and Governance #Firm Innovation and Growth

paper · doi:10.1017/s0022109011000160

Abstract

Abstract This paper studies the impact of buyout sponsors’ initial public offering (IPO) timing on the leveraged buyout (LBO) restructuring process and subsequent exit strategies. I find that LBO duration is negatively related to hot IPO market conditions. Further, following IPOs, reverse leveraged buyouts (RLBOs) with shorter LBO duration experience greater deterioration of performance and higher probability of bankruptcy. This suggests that sponsors’ efforts to enhance operating efficiency succumb to market timing. IPO timing does not affect sponsors’ exit strategies and monitoring post IPO. Sponsors keep an active long-run presence with more reputable sponsors who are more likely to exit by facilitating takeovers.

Citations

• The "Hot Issue" Market of 1980
• The Choice of IPO versus Takeover: Empirical Evidence*
• Sample Selection Bias as a Specification Error

Related

• The Choice of IPO versus Takeover: Empirical Evidence*
• Signaling Firm Value through Board Structure: An Investigation of Initial Public Offerings
• Where Have All the IPOs Gone?
• Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
• Hot Markets, Investor Sentiment, and IPO Pricing*