The impact of LBO operations on the long-term performance of companies: An analysis of key success factors

Abstract

This study analyzes the effects of LBO (Leveraged Buyout) operations on the long-term performance of companies. It focuses on key success factors and the specific impacts of different exit strategies, such as IPOs and strategic sales. Through case studies (Wincor Nixdorf, Techem, Trevira), the study evaluates the influence of debt, ownership concentration, and managerial participation on post-LBO outcomes. The research reveals that the financial discipline induced by debt can have lasting positive effects. Companies often maintain cost discipline even after reducing their debt levels. However, post-LBO growth strategies vary depending on ownership structure and managerial involvement. The results show that debt and financial discipline continue to positively influence performance even after the LBO exit. Ownership concentration plays a crucial role in post-LBO management, affecting the engagement of former owners and the company’s performance. Strategic oversight and managerial participation in equity are essential for maintaining effective management. In conclusion, post-LBO performance is significantly influenced by debt management, ownership concentration, and managerial participation. The study recommends optimizing governance, maintaining rigorous debt management, and aligning managerial incentives to promote long-term success. Future research avenues are suggested, including a deeper exploration of governance and long-term performance metrics.

Keywords: LBO; Long-term performance; Corporate governance; Financial risk; Post-LBO performance.

JEL Classification :  G34, G32, L25, M21  

Paper type: Empirical research