Chapter 18: Private equity, RLBOs and IPO performance
This research is motivated by the unprecedented activity of private equity since the1980s. The market not only witnessed records set for the amounts of aggregate fund raising or leveraged buyout (LBO) investment activity but also records size of the individual buyout funds raised or individual LBO transactions undertaken. Private equity (PE) investments have a profound economic impact in spurring entrepreneurship and restructuring in many industries worldwide. At the same time, the rapid growth and globalization of the PE industry started to worry policy makers by raising demands for increased regulation and disclosure of PE investment and the restructuring process. One important and noticeable development of PE activity in the initial public offering (IPO) market is the reverse leveraged buyouts (RLBOs). Those are the IPOs of firms that have previously been bought out by professional later-stage private equity investors. For instance, in 2005, approximately 53 percent of IPOs in the US were backed by private equity investors and in 2006; 42 percent were RLBOs.
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