A Study on the Relationship Between Leveraged Buyouts and Profitability
DOI:
https://doi.org/10.54097/va37jh45Keywords:
Leveraged Buyouts; Profitability analysis; Strategic management.Abstract
This article delves into the profitability of post-buyout subsidiaries resulting from Leveraged Buyouts (LBOs), focusing on prominent examples such as Blackstone, Hilton, Bain Capital, and Toys "R" Us. Through a comparative analysis of two scenarios, it scrutinizes the impact of LBOs on the profitability of these companies. Previous research predominantly concentrated on isolated aspects, lacking comprehensive cross-comparisons across various domains. This study addresses this gap by broadening the scope, aiming for a more holistic understanding. The paper examines notable instances such as the Blackstone Hilton lawsuit and Bain Capital's involvement with Toys "R" Us. It reveals that the success of LBOs hinges on several critical factors, including a robust underlying business model, an appropriate financing structure, and a well-defined exit strategy. By elucidating these key components, the research provides insights into the dynamics of LBOs and their implications for post-buyout profitability. The findings contribute to a deeper comprehension of the intricate relationship between LBOs and profitability, offering valuable guidance for stakeholders in the financial and corporate sectors.
Downloads
References
Kaplan, S. N. (1989). The effects of management buyouts on operating performance and value. Journal of Financial Economics, 24(2), 217–254.
Lerner, J., & Leamon, A. (2023). Teaching Private Equity in an Era of Uncertainty: Introduction to Private Equity, Venture Capital, and the Financing of Entrepreneurship: The Power of Active Investing, New York, Wiley 2023. Venture Capital, and the Financing of Entrepreneurship: The Power of Active Investing, New York, Wiley.
Zykov, S. V. (2022). Fostering Digitalization: IT-Intensive Businesses. In IT Crisisology Casebook: Smart Digitalization for Sustainable Development (pp. 65-87). Singapore: Springer Nature Singapore.
Corkery, M. (2017). Toys R Us files for bankruptcy crippled by competition and debt. New York Times, (September 19).
Rockett, G. (2024). Hilton's approach to diversity, equity and inclusion management. In The Routledge Handbook of Diversity, Equity, and Inclusion Management in the Hospitality Industry (pp. 321-331). Routledge.
Austin, N., & Phalippou, L. (2023). Decomposing value gains–The case of the best leveraged buy-out ever. Journal of Corporate Finance, 81, 102317.
Singh, P., Gupta, A., & Dwivedi, P. (2023, March). Financial and Management Accounting: The Analysis of Financial Models for comparison. In 2023 2nd International Conference for Innovation in Technology (INOCON) (pp. 1-6). IEEE.
Hilton Annual reports. (2013). https://ir.hilton.com/financial-reporting/annual-reports, last accessed 2024/03/03.
Hilton, B., Hajihashemi, B., Henderson, C. M., & Palmatier, R. W. (2020). Customer Success Management: The next evolution in customer management practice?. Industrial marketing management, 90, 360-369.
Morgan, J., & Nasir, M. A. (2021). Financialised private equity finance and the debt gamble: The case of Toys R Us. New political economy, 26(3), 455-471.
Stowell, D. P., & Raino, M. (2017). The Toys “R” Us LBO. Kellogg School of Management Cases, 1-23.
Wang, X., Chan, C. K., & Yang, L. (2021). Economic restructuring and migrant workers’ coping strategies in China’s Pearl River Delta. Third World Quarterly, 42(4), 812–830.
Lee, H. K. and Abdul Raziff, A.R. (2021). The impact of technology adoption on the success and failure of two toys industry: Hasbro and toys R us, The Journal of Management Theory and Practice (JMTP), 96-103.
Downloads
Published
Issue
Section
License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.






