This dissertation consists of three essays that examine differences between two different forms of going-private transactions: leveraged buyouts (LBOs) and management buyouts (MBOs). My main focus is to look at what separates MBOs and LBOs in terms of motivations and outcomes. I argue that the desire for decision-making control of the firm is what drives both the choice of an MBO over an LBO and many strategic decisions leading up to the transaction itself. The first essay surveys the literature and develops testable hypotheses that distinguish between MBOs and LBOs. Using control to differentiate between these two types of transactions is important because I wish to examine how decision-making control of the firm motivates each participant in the transaction. This leads to hypotheses about pre-buyout ownership structure, which affects the probability of choosing either an MBO or LBO. The second essay examines the determinants of LBOs and MBOs, and the effects of financing conditions and firm characteristics in a sample of U.S. firms that went private through LBOs and MBOs from 2000 to 2011 relative to the firms that were public during this period. I find significant differences between the LBO and MBO samples. Tighter lending conditions decrease the probability of an LBO but increase the probability of an MBO. In addition, while liquidity and growth opportunities are negatively correlated with the probability of going private for both LBOs and MBOs, the latter plays a stronger role for MBOs. The third essay analyzes differences in the determinants of the premiums paid when taking a firm private. Since the choice between an MBO and an LBO is one of self-selection, the empirical methodology must take this into account. I use a two-stage regression model to control for this selection bias. The first-stage probit model shows that ownership is the main determinant of the selection of the transaction type. The second-stage model shows that the determinants of MBO and LBO premiums are substantially different. The level of insider ownership has a large negative effect on MBO premiums, but no effect on LBO premiums. Overall, this dissertation contributes to the existing literature by examining heterogeneity among firms that go private. I test this heterogeneity and find significant differences between MBO and LBO firms, both in terms of the motivations for taking the firm private and the premiums paid in the transaction.

La thèse a pour ambition de confronter un grand classique du droit des sociétés, la notionmême de société, avec les exigences confinant parfois au « vampirisme financier » de cetarchétype du capitalisme financier qu’est un « Leveraged Buy Out ». Un LBO se traduit, sousl’angle du droit des sociétés, par la constitution d’un ensemble sociétaire composé de deuxsociétés : celle qui achète (la holding de reprise) et celle qui est achetée (la « cible »). Pouraussi importante que soit la seconde, c’est à l’étage supérieur, celui de la holding de reprise,que sont cristallisées les spécificités du montage et leur incidence sur la notion de société.Cette incidence est mesurée au niveau du fond (Partie I) et de la forme (Partie II) de lasociété qui sert de pierre angulaire au montage de LBO.PARTIE I : L’INCIDENCE DU LBO SUR LE FOND DE LA SOCIETELe fond de la société étudiée a été entendu comme ce qu’elle a d’essentiel et qui lui donneconsécutivement son identité. La démonstration a été conduite à partir de deux aspectsfondamentaux de cette société: ce qu’elle fait, c'est-à-dire son activité (Titre I) et ce qu’elleest, c’est à dire sa qualification (Titre II). Ces deux aspects reflètent bien, dans un LBO, latéléologie de la holding de reprise, cette dimension fonctionnelle de la société qu’a simagistralement mise en lumière l’« Ecole de Rennes ». La holding de reprise a en effet unedouble finalité : elle organise à la fois une opération sociétaire (une prise de contrôle aveceffet de levier) et une opération contractuelle (un « contrat d’investissement » entendu commeun contrat de prêt d’argent), la seconde étant clairement l’accessoire de la première. Cettepremière partie conduit l’auteur à proposer de renouveler l’étude de certaines questionsmajeures en droit des sociétés, comme celle de la nature juridique de l’acquisition et de ladétention du contrôle d’une société commerciale (la « cible ») ou encore celle de laqualification proposée en doctrine de « contrat d’investissement » d’une société (telle laholding de reprise) dont le capital est ouvert à des professionnels du capital investissement.PARTIE II : L’INCIDENCE DU LBO SUR LA FORME DE LA SOCIETELe mot forme doit être ici compris dans une double acception. Il est d’abord retenu dans sonsens taxinomique comme faisant référence aux différents types de sociétés qui peuvent êtreutilisés pour jouer le rôle d’habit juridique de la holding de reprise. Il vise également, defaçon subséquente et liée, l’aboutissement du travail du spécialiste du droit des sociétés4cherchant, une fois un type de société choisi, à en utiliser toutes les potentialités pour adapterle type choisi aux besoins spécifiques du montage de LBO. La raison de l’incidence du LBO àce niveau tient à la nécessité de rechercher un maximum de liberté contractuelle pourpermettre cette adaptation de la forme au fond. Il s’agit en effet de pouvoir choisir dans lapalette des instruments offerts par le droit des sociétés ceux qui permettront d’organiser leplus efficacement possible d’une part, l’effet de levier attendu sous l’angle juridique del’interposition de la holding de reprise entre le repreneur et la « cible », d’autre part lepartenariat entre ce repreneur et les financiers qui participent au « tour de table » de cetteholding. La démonstration est conduite d’abord pour un montage national (Titre I) puis pourun montage transfrontalier (Titre II). / The dissertation means to focus on confronting a classic of corporate law, the very notion ofcompany, with the requirements often bordering on « financial vampirism » related to thisarchetype of financial capitalism, the « Leveraged Buy Out ». A LBO embodies, from thepoint of view of corporate law, the setting-up of a grouping made up of two companies, one :the take-over holding company, the other : the one that is being bought, the « target ».However important the latter may be, it is at the upper level, the take-over holding company,that the specific features of the financial set-up and their impact on the notion of company arebest given a definite form. The impact is measured according to the content (Part I) and theform (Part II) of the company which acts as the cornerstone in the financial set-up of a LBO.PART I : THE IMPACT OF THE LBO ON THE CONTENT OF THE COMPANYThe content of the company studied here, has been grasped as what constitutes its essential,defining consequently its identity. The demonstration has been conducted from thefundamental aspects of the company : what it does, i-e its operations (Heading I) and itsnature, i.e its qualification (Heading II). The two aspects well evince, in a LBO, theteleology of the take-over holding company, that functional dimension of the company, sobrilliantly expounded by the « Rennes School ». Indeed the take-over holding company has adouble purpose : organizing both a share-holding operation (a take-over with leverage) and acontractual operation (an investment contract conceived as a loan contract), the latter beingclearly incidental to the former. This first part lead us to propose renewing the study of somemajors questions related to corporate law such as the legal nature of the control acquisitionand holding of a trading company (the « target ») as well as that of the qualification putforwardas doctrine of « investment contract » of a company (such as a take-over holdingcompany) with a capital open to professionals of capital investment.PART II. THE IMPACT OF THE LBO ON COMPANY STRUCTUREThe word form should here be understood in tis double meaning. It is first used in itstaxinomic sense, referring to the different company structures that can be applied to play therole of legal outfit for the take-over holding company. It also aims, subsequently and closelylinked, at the outcome of the corporate law specialist’s task, once the company’s structure has6been chosen, endeavouring to use all its inherent capacities for growth in order to adapt thechosen structure to the specific requirements entailed in the setting-up of the LBO.The reason of the LBO’s impact at his stage stems for the need for seeking the maximumcontractual freedom allowing the adaptation of structure to content. It is indeed a matter ofbeing able to choose in range of instruments made available by corporate law, those allowingto organize as efficiently as possible on the one hand, the legally expected leverage performedin the take-over holding company’s intervention between the rescuer and the financiers takingpart in the take-over holding company’s investor round. The demonstration is first conductedfor a financial set-up at national level (Heading I) then cross-border (Heading II).

Práca sa zaoberá problematikou financovania akvizícií metódou LBO. Popisuje podstatu financovania akvizície úverovou pákou, rozoberá motívy pre zrealizovanie LBO ako aj prínosy a možné riziká vyplývajúce z LBO transakcie. Práca charakterizuje úrovne a druhy akvizičného dlhu (Prioritný dlh, Mezanínový dlh) a popisuje celkový proces štrukturovania LBO transakcie. Rozoberá prístup banky k akvizičnému financovaniu a pojednáva o základných technikách financovania LBO prostredníctvom banky. Práca zahrňuje praktické príklady LBO transakcií a obsahuje vývoj na trhu LBO a trendy financovania LBO.

<p>During the eighties a new type of financial transaction started to emerge on an increasing basis. It was the so called “leveraged buyout” also known as the LBO. In the US private equity firms made it to the headlines in financial media from engaging in leveraged buyouts with small equity investments and large amounts of borrowed capital, their targets where large solid multinational corporations. Much has happened since the eighties. Back then leveraged buyouts where often associated with terms such as “Slash and Burn” or “Buy, Flip and Strip” often meaning hostile takeovers and huge layoffs. Today private equity firms focus more on active ownership, fast decisions without the bureaucracy of the stock market and long term value creation in order to profit from their buyouts.</p><p>As private equity firms today invest tremendous amounts of capital through their private equity funds. Leveraged buyouts have become one of the major areas within investment banking. Even though the LBO is a common transaction it is often hard to find models used for valuation of such a deal. Private equity funds and investment banks all have their own valuation models but these are regarded as strictly confidential and seldom revealed to the public. Therefore the creation and publication of an LBO valuation model should be of great interest for everyone aiming at a future career within private equity, corporate finance or investment banking.</p><p>This thesis derives a complete LBO valuation model including a framework for finding a suitable LBO target. The LBO valuation model is created in cooperation with the debt capital markets department at one of the leading investment banks in the Nordic region. The framework is based on a qualitative study conducted on seven of the most distinguished private equity firms active in Sweden. In order to show how the LBO valuation model and the framework works, both are applied on the retail company Björn Borg listed on NASDAQ OMX. To verify the accuracy of the framework, calculated return from the model is analyzed and compared to the indications given by the framework.</p>

During the eighties a new type of financial transaction started to emerge on an increasing basis. It was the so called “leveraged buyout” also known as the LBO. In the US private equity firms made it to the headlines in financial media from engaging in leveraged buyouts with small equity investments and large amounts of borrowed capital, their targets where large solid multinational corporations. Much has happened since the eighties. Back then leveraged buyouts where often associated with terms such as “Slash and Burn” or “Buy, Flip and Strip” often meaning hostile takeovers and huge layoffs. Today private equity firms focus more on active ownership, fast decisions without the bureaucracy of the stock market and long term value creation in order to profit from their buyouts. As private equity firms today invest tremendous amounts of capital through their private equity funds. Leveraged buyouts have become one of the major areas within investment banking. Even though the LBO is a common transaction it is often hard to find models used for valuation of such a deal. Private equity funds and investment banks all have their own valuation models but these are regarded as strictly confidential and seldom revealed to the public. Therefore the creation and publication of an LBO valuation model should be of great interest for everyone aiming at a future career within private equity, corporate finance or investment banking. This thesis derives a complete LBO valuation model including a framework for finding a suitable LBO target. The LBO valuation model is created in cooperation with the debt capital markets department at one of the leading investment banks in the Nordic region. The framework is based on a qualitative study conducted on seven of the most distinguished private equity firms active in Sweden. In order to show how the LBO valuation model and the framework works, both are applied on the retail company Björn Borg listed on NASDAQ OMX. To verify the accuracy of the framework, calculated return from the model is analyzed and compared to the indications given by the framework.

Face à une technique financière novatrice, le droit peut adopter trois postures. Il peut d'abord prévoir, a priori, un cadre juridique spécialement dédié. Il peut aussi la laisser se développer, puis intervenir a posteriori afin de l'encadrer. Il peut enfin choisir de ne lui consacrer aucun cadre particulier, laissant aux règles existantes le soin de la régir. C'est conformément à cette troisième méthode que les Leveraged Buy-Out (LBO), qui consistent pour un repreneur à prendre le contrôle d'une société par l'intermédiaire d'une holding interposée et par recours à l'endettement, ont été accueillis par le droit français. Reposant sur une instrumentalisation de la règle de droit, et étant risquée par nature car fondée sur l'endettement, l'emploi de cette méthode à l'endroit des LBO suscite forcément des questionnements. En tout état de cause, l'absence de cadre réglementaire particulier signifie, dans un regime de liberté, que le droit accepte par principe cette modalité de prise de contrôle. Néanmoins, les risques dont ils sont porteurs pouvant survenir lors de l'exercice du contrôle, le droit aura alors tendance à intervenir plus activement afin de l'encadrer. Un travail de recherche portant sur le LBO, sous le prisme du mode de réception adopté par le droit pour l'accueillir, doit permettre, d'une part, de cerner les singularités de son régime juridique dans le contexte français, et d'autre part, d'évaluer la pertinence et les effets de la méthode qui consiste à laisser une figure financière originale être appréhendée par les normes existantes. / Faced with an innovative financial technique, the law can adopt three postures. First, the law can provide, upstream, a specially dedicated legal framework. Secondly, the law can, also, let it develop, and then, act retrospectively to frame it. Finally, the law can also choose not to devote any particular framework, and let the operation be governed by existing rules. French law used this third method to welcome the Leveraged Buy-Out (LBO), which consist for a buyer to take control of a company using debt and through a Special Purpose Vehicle. Based on a manipulation of the rules of law, and risky because based on debt, the use of that method for the LBOs inevitably raises questions. In any case, the absence of specific regulatory framework mean, in a regime of liberty, that the law accepts, in principle, this particular type of acquisition of a company. However, because the risks they carry can occur during the exercise of control on the acquired company, the existing laws will intervene more actively to frame it. Research work on the LBO, from the perspective of the receiving mode adopted by the legal system to receive it, must, firstly, permit to identify the peculiarities of its legal status in the French context, and on the other hand, to assess the relevance and impact of the method which consist in leaving an original financial operation be governed by the existing standards.

Background: Sustainability has become an increasingly important and current topic, where sustainable investments have increased tenfold in the last decade. PE accounts for an extensive amount of capital for Swedish companies, giving them great opportunities to impact the sustainable development of the Swedish economy. Aim: The aim of the study is to analyze the extent to which PE-firms are incorporating sustainability as part of their business, how they have been affected by the heightened awareness surrounding sustainable development and if they believe that it can create value in their portfolio companies. Method: In order to attain the aim of the study, a qualitative method was used. Semi-structured interviews were held with seven PE-firms and one interest association representing Sweden’s PE-sector. Conclusion: The results indicate that PE-firms specializing in LBO-investments, generally, incorporate sustainability as part of their business to a greater extent than VC-firms. Moreover, sustainability is almost exclusively considered in the pre-investment phase, also known as the screening-phase. The value retrieved from sustainable activities does not seem to have a direct connection to a monetary reward and should therefore rather be considered in terms of becoming more attractive as an employer and in the face of investors. / Bakgrund: Hållbar utveckling blir ett allt mer viktigt och aktuellt fenomen för företag att arbeta med, där hållbara investeringar har ökat tiofaldigt det senaste årtiondet. PE står för en omfattande del av finansieringen av företag i det svenska näringslivet, vilket innebär att de har stora möjligheter att påverka hållbarhetsarbetet i den svenska ekonomin. Syfte: Syftet med studien är att undersöka och analysera i vilken utsträckning PE-bolag arbetar med hållbarhetsfrågor, hur de påverkats av en ökad medvetenhet kring hållbar utveckling samt om PE-bolagen upplever att det kan skapa värde i portföljbolagen. Metod: För att uppnå studiens syfte har ett kvalitativt tillvägagångssätt använts, där empirin erhållits genom semistrukturerade intervjuer med sju PE-bolag samt en intresseorganisation för PE. Slutsats: Resultaten tyder på att PE-bolag inriktade på LBO-investeringar, generellt sett, arbetar mer med hållbarhet än VC-bolag. Det går även att se att PE-bolagen främst arbetar med hållbarhet inför en investering, i screeningfasen. Det värde som fås av hållbarhet verkar inte direkt kunna spegla ett monetärt värde utan verkar snarare ge andra mjukare värden såsom att bolagen blir attraktivare både som arbetsgivare och för investerare.

The capital structure of leveraged buyout (LBO) companies often differs dramatically from that of other companies. What factors drive the amount of leverage in LBO transactions are often contrasted by two different views in previous research. The first view, based on the trade-off theory and the pecking order theory, states that leverage is driven by traditional firm characteristics. The second view, based on the market timing theory, instead states that leverage in LBOs foremost is driven by whether or not conditions in the credit market are favorable. Previous research that has investigated LBO companies' leverage in particular has voiced concerns that the first view that stems from classic capital structure theories may not be completely applicable on LBO companies.  The purpose of this paper is to examine what drives leverage in Swedish LBOs between the years of 2001 and 2021. To do this, a univariate analysis has been conducted to investigate patterns in leverage in different states of the credit market. Furthermore, an econometric approach was taken in a multivariate analysis to analyze which factors drive leverage in Swedish LBOs. The results contradict previous LBO research to some extent as leverage in Swedish LBOs is not driven by credit market conditions nor firm specific characteristics, except for tangibility which has a positive impact on leverage in one setting.

Lean combustion is increasingly employed in both ground-based gas turbines and aircraft engines for minimizing NOx emissions. Operating under lean conditions increases the risk of Lean Blowout (LBO). Thus LBO proximity sensors, combined with appropriate blowout prevention systems, have the potential to improve the performance of engines. In previous studies, atmospheric pressure, swirl flames near LBO have been observed to exhibit partial extinction and re-ignition events called LBO precursors. Detecting these precursor events in optical and acoustic signals with simple non-intrusive sensors provided a measure of LBO proximity. This thesis examines robust LBO margin sensing approaches, by exploring LBO precursors in the presence of combustion dynamics and for combustor operating conditions that are more representative of practical combustors, i.e., elevated pressure and preheat temperature operation. To this end, two combustors were used: a gas-fueled, atmospheric pressure combustor that exhibits pronounced combustion dynamics under a wide range of lean conditions, and a low NOx emission liquid-fueled lean direct injection (LDI) combustor, operating at elevated pressure and preheat temperature. In the gas-fueled combustor, flame extinction and re-ignition LBO precursor events were observed in the presence of strong combustion dynamics, and were similar to those observed in dynamically stable conditions. However, the signature of the events in the raw optical signals have different characteristics under various operating conditions. Low-pass filtering and a single threshold-based event detection algorithm provided robust precursor sensing, regardless of the type or level of dynamic instability. The same algorithm provides robust event detection in the LDI combustor, which also exhibits low level dynamic oscillations. Compared to the gas-fueled combustor, the LDI events have weaker signatures, much shorter durations, but considerably higher occurrence rates. The disparity in precursor durations is due to a flame mode switch that occurs during precursors in the gas-fueled combustor, which is absent in the LDI combustor. Acoustic sensing was also investigated in both the combustors. Low-pass filtering is required to reveal a precursor signature under dynamically unstable conditions in the gas-fueled combustor. On the other hand in the LDI combustor, neither the raw signals nor the low-pass filtered signals reveal precursor events. The failure of acoustic sensing is attributed in part to the lower heat release variations, and the similarity in time scales for the precursors and dynamic oscillations in the LDI combustor. In addition, the impact of acoustic reflections from combustor boundaries and transducer placement was addressed by modeling reflections in a one-dimensional combustor geometry with an impedance jump caused by the flame. Implementing LBO margin sensors in gas turbine engines can potentially improve time response during deceleration transients by allowing lower operating margins. Occurrence of precursor events under transient operating conditions was examined with a statistical approach. For example, the rate at which the fuel-air ratio can be safely reduced might be limited by the requirement that at least one precursor occurs before blowout. The statistics governing the probability of a precursor event occurring during some time interval was shown to be reasonably modeled by Poisson statistics. A method has been developed to select a lower operating margin when LBO proximity sensors are employed, such that the lowered margin case provides a similar reliability in preventing LBO as the standard approach utilizing a more restrictive operating margin. Illustrative improvements in transient response and reliabilities in preventing LBO are presented for a model turbofan engine. In addition, an event-based, active LBO control approach for deceleration transients is also demonstrated in the engine simulation.

Examensarbete i foretagsekonomi, Ekonomihögskolan vid Linnéuniversitetet, 2FE93E, VT 2017 Författare Johan Asplund, Henrik Norrman och Therese Rodger Handledare Andreas Stephan Titel Hur investmentbolag paverkar kapitalstrukturen i sina innehav - En fallstudie av Ratos Bakgrund Bolags kapitalstruktur, fördelningen mellan bolagets tillgångar och skulder, visar hur bolaget finansierar sin verksamhet. Private Equity bolag lånar kapital för att kunna investera i nya uppköp av onoterade bolag och har ofta en begränsad planerad ägarhorisont. Kapitalstruktur har undersökts under lång tid men inte hur en majoritetsägare påverkar kapitalstrukturen i sina andelsbolag. Tidigare studier fokuserar pa exempelvis kapitalstrukturer i industriföretag eller kapitalstrukturer i småforetag. Syfte Syftet med studien ar att analysera om ett investmentbolag påverkar kapitalstrukturen i sina innehavsbolag nar de genom uppköp har gått in som en majoritetsägare i dessa bolag och vilka effekter förändringen kan leda till. Metod Studien utgår från en kvantitativ ansats där finansiella nyckeltal av Ratos innehavsbolag undersöks före och efter det att Ratos gått in som majoritetsagare i bolaget. Dessa nyckeltal jämförs sedan med branschspecifika nyckeltal genererade från SCB. Resultat I studien återfinns inget entydigt bevis på att vårt valda Private Equity bolag, Ratos, ändrar kapitalstrukturen väsentligt på något sätt efter att ha gått in som majoritetsägare i ett bolag. / A company’s choice of capital structure is a well documented field in financial research but no unambiguous results are available regarding how the company is best financed or what actually defines the optimal capital structure for a company. The purpose of this study is to examine the possible changes on a company’s capital structure once a Private Equity company has become the majority owner. In this study a deductive approach has been used and a quantitative survey has been applied. Financial ratios from yearly reports of companies before and after the Swedish Private Equity company Ratos became the majority owner have been analysed and compared with the hypothesis that a Private Equity majority owner would significantly change the capital structure of the acquired company. The selection criteria for the companies was that Ratos should own more than 50 % of the company in order to actually have an impact on how the company is financed, in addition the selected companies needed to have data available in the form of yearly reports both prior to Ratos becoming the majority owner and at least two years afterwards in order to study the eventual changes of the take over. Financial ratios such as debt to equity ratio, leverage and return on equity were then calculated and results analysed. Theories of capital structure such as the Trade off theory, Pecking order theory, Miller and Modigliani and the Agency theory have also been applied to analyse the outcome. The method of comparison used was the differencein-difference method with data from Statistics Sweden (SCB) from similar relevant companies. The results of this study do not indicate that the capital structure of the company changes significantly within the first two years after acquisition by the majority owner Ratos. Suggestions for further studies would be to analyse a wider group of Private Equity companies as majority owners and observe eventual changes in capital structure in takeovers.