Leveraged Buyouts in Morocco: catalysts for value creation and corporate governance

Abstract

Leveraged Buyout (LBO) structures hold a pivotal place within the regulated private equity ecosystem in Morocco, despite their limited development and the challenges they face. In comparison to the stock exchange market, these structures continue to demonstrate robust performance. Build upon agency theory, which delves into the relationships between owners and managers within firms, this study primarily aims to deeply examine how leverage and governance influence value creation in these transactions. The adopted methodology is qualitative, based on semi-structured interviews with six LBO sector experts in Morocco. This methodological choice is justified by the exploratory nature of the research, allowing for in-depth analysis and understanding of the nuances and practices in this specific domain. Moreover, exploratory questions drawn from existing literature were employed to guide the inquiry and steer discussions. Results derived from this qualitative approach highlight a discernible and significant impact that these two factors - leverage and governance - exert on the wealth creation process. The theoretical contributions of this research enrich the understanding of LBOs in Morocco by emphasizing the importance of financial leverage, transparent governance, and alignment of interests for the success of these transactions. On a practical level, it offers valuable insights for investors, managers, and professionals in the Moroccan LBO sector. However, it is essential to consider the inherent limitations of this research, including the small sample size and the qualitative nature of the interviews.

Keywords: Leveraged buyouts – indebtedness – corporate governance – value creation – agency theory.

Classification JEL:  G11

Paper type: Empirical Research