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380259 |
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|a Bouvier, Laurent
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|a Nisar, Tahir M.
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|a Disciplining management or guiding management: aligning interests in securitized leveraged buyouts
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|c 2015-01.
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|z Get fulltext
|u https://eprints.soton.ac.uk/380259/1/Bouvier_et_al-2015-Journal_of_Corporate_Accounting_%2526_Finance.pdf
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|a Leveraged buyouts (LBOs) are generally explained in terms of a governance mechanism that disciplines management. It is operationalized by increasing the leverage of a firm, which has an implicit consequence of constraining management in the use of free cash flows. However, under a relatively new form of LBO known as securitized leveraged buyouts, private equity firms raise funds on the back of the acquired company's operating assets. A securitized LBO imposes explicit restrictions on management with regard to its freedom for carrying out strategy decisions. Using the case study of Hertz, we show how a securitized LBO can be structured more efficiently and what important decisions must be made in order to improve its debt service capacity.
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