Journal of Economic Perspectives: Vol. 23 No. 1 (Winter 2009)


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Leveraged Buyouts and Private Equity

Article Citation

Kaplan, Steven N., and Per Stromberg. 2009. "Leveraged Buyouts and Private Equity." Journal of Economic Perspectives, 23(1): 121-46.

DOI: 10.1257/jep.23.1.121


In a leveraged buyout, a company is acquired by a specialized investment firm using a relatively small portion of equity and a relatively large portion of outside debt financing. The leveraged buyout investment firms today refer to themselves (and are generally referred to) as private equity firms. We describe and present time series evidence on the private equity industry, considering both firms and transactions. We discuss the existing empirical evidence on the economics of the firms and transactions. We consider similarities and differences between the recent private equity wave and the wave of the 1980s. Finally, we speculate on what the evidence implies for the future of private equity.

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Kaplan, Steven N. (U Chicago)
Stromberg, Per (Stockholm School of Economics and Institute for Financial Research, Stockholm)

JEL Classifications

G32: Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
G34: Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
G24: Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies


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