The Performance of Leveraged Buyout-Backed Initial Public Offerings in the UK

Abstract

This paper investigates the long-term stock price performance of initial public offering (IPO) firms in the United Kingdom that were previously owned by leveraged buyout (LBO) funds. A sample of 128 LBO-backed IPOs and 1,121 non-LBO-backed IPOs between 1990 and 2006 is analysed for the long-term performance of these offerings. The analysis suggests that LBO-backed IPOs beat the stock market and outperform non-LBO-backed IPOs. The analysis identifies factors driving outperformance, most significantly the percentage of share capital held by the buyout group after the offering.

Keywords: initial public offerings (IPOs), private equity, leveraged buyouts (LBOs), reverse leveraged buyouts (RBLOs), stock price performance, long-term event study, United Kingdom (UK)

JEL Classification: G12, G14, G15, G24