MODEL FOR ANALYZING AND SELECTING A TARGET COMPANY FOR A LEVERAGED BUYOUT

Leveraged buyout transactions (LBOs), facilitating the acquisition of a leveraged business, have been relevant at all times. But in modern conditions of deepening crisis, tougher sanctions and mass withdrawal of foreign companies and investors from the country, their relevance increases significantly. In the article on the basis of the theory of agency agreements the system of financial indicators of the companies is specified, allowing defining presence of risk of agency problems and making basis of the analysis and choice of the purpose of the financed redemption for reduction of this risk. The formed model of logistic regression allowed testing the hypotheses about the influence of financial performance indicators on the choice of the company as an object for a leveraged buyout. The model was tested using a sample of data from U.S. public companies, both those that participated in leveraged buyouts completed between 2009 and 2019 and those that did not participate in LBOs. Companies were selected based on appropriate standard industry classification codes and similar levels of market capitalization to LBO firms. The results of the Mann — Whitney — Wilcoxon test and the simultaneous equation system tests confirmed the significance of the effects of financial leverage, free cash flow level, company market to book value ratio, return on equity, and average revenue growth on the probability of choosing a company as an LBO target. The significance of the impact of the level of tangible assets and fixed assets in the company’s assets on its selection as a buyout target was refuted. The conducted research contributes to the further development of the theory and practice of financial analysis and the choice of the target of a leveraged buyout.

leveraged buyout, LBO goal, target company selection, analytical reasoning, financial performance, agency relations theory, model, logistic regression, sampling, factors

Balakin I. A. Model for analyzing and selecting a target company for a leveraged buyout. Biznes. Obrazovanie. Pravo = Business. Education. Law. 2023;2(63):80—85. DOI: 10.25683/VOLBI.2023.63.627.