Reasons For The Popularity Of Lb Os During The 1980s.

3306 words - 13 pages

1.INTRODUCTIONThe leveraged buyout phenomenon has been subject of many studies by a number of financial theorists, which have attempted to give an explanation of this trend during the 1980s, evaluating historic and financial aspects of that époque and previous.In this essay, we will see at those different panoramas and aspects that took companies to accomplish a wave of corporate restructuring during the 1980s and why these factors enhanced the use of Leveraged Buyouts. In addition will se the diverse features companies must have in order to be a leveraged buyout target and the consequences after the buyout is accomplish in order to reach a better level of efficiency with and obvious benefit in capital gain for its investors.2.THE BOOM IN LEVERAGED BUYOUTS (LBOs) DURING 80s2.1WHAT IS A LBOThe leveraged buyout is a form of corporate restructuring which had its most important period during the 1980s. The essential characteristic of LBOs is the high level of debt is incurred in order to unify and reduce the ownership to achieve a superior point of efficiency and profits maximization. This dramatic increase in debt ratios, according to Hite & Owers (1996), can go from 1 to 10.A LBO according to Brealey & Myers (2003) varies in two main ways from the normal acquisition process. First, the purchase of the stock is debt financed or at least a substantial portion, some often the debt used in this type of restructuring is debt below investment grade or also denominate Junk Bonds. Second, the LBO goes private and its shares do not trade longer on the open market.This reduction and unification in ownership, brings itself a number of repercussions in the managerial level and the company's structure.2.2HISTORICAL, ECONOMIC AND FINANCIAL FACTORSAccording to Weston & Johnson (2001), the leveraged activity can be divided in three important periods, the 1980s, the early 1990s and the post-1992. The leveraged activity comes from not just the 1980s decade, but from previously period of highly leveraged transactions during the 1970s.The economy's health and expansion during the 1980s until 1992, was a key factor of the increase in Merger and Acquisition transaction. According to Weston & Johnson (2001), previous boosts had followed similar patters of economy welfare in restructuring activity. M&A and divestiture transactions had its highest activity during 1986; meanwhile 1988 was the top for LBOs transactions.One economic factor involved in this LBOs wave, was the constant increase in inflation during the late 1960s to 1982. This factor causes a drop in the q-ratio levels from 1.3 in 1965 to 0.58 in 1982. This ratio measures the market value of a firm to the replacement cost of its assets (Weston & Johnson 2001). Therefore during 1981, is given the opportunity to buy cheaper capacity in the financial market rather than in the real assets market because of the q-ratio. Therefore, the value of a company in the financial markets would...

Find Another Essay On Reasons for the popularity of LBOs during the 1980s.

Exploring the Reasons Behind the Popularity of Sir Arthur Conan Doyle's Stories

1435 words - 6 pages Exploring the Reasons Behind the Popularity of Sir Arthur Conan Doyle's Stories Although not a real detective, the character of Sherlock Holmes gave the general public a sense of security because in the stories he is seen to solve cases quite easily, such as in "The Man With The Twisted Lip." Watson says "I wish I knew how you reached your results" and Holmes replies, "I reached this one, by sitting upon five pillows and

Sherlock Holmes: Explore the reasons behind the enduring popularity

3435 words - 14 pages Sherlock Holmes: Explore the reasons behind the enduring popularity. One of the main reasons for the enduring popularity of Sherlock Holmes from the time it was written to the present day was the way that all the stories were told through the eyes of Dr. Watson. This showed how incredible Sherlock Holmes was when his own powers of deduction could see a lot more clues and evidence from the same hat as we the reader could see. Also with

The Popularity Of The Net

719 words - 3 pages The Popularity of the Net Internet "" one of the most important subjects everyone is talking about these days. From computer-nerds to the people with a high dosage of computer-phobia, everyone is connecting to the ever-growing Information Superhighway. No one is willing to risk staying behind in the Information Revolution.What is the cause of the Internet's popularity? Millions are connected day and night to use the Internet's tremendous

Discuss how F. Mernissi interprets the reasons for the "descending of the veil" in Medina during the Prophet's life

858 words - 3 pages The selected readings in "The Veil and the Male Elite" shed a different perspective on reasons of the descending of the veil. Mernissi's accurate knowledge in the field as well as continuous use of substantial support for her reasoning as to why the veil was descended appeals to me more than anything I have read before. The veil or hijab is basically a head wrapping that covers the women's face as well as hair only showing the eyes. While others

The Privatization Initiatives of the 1980s

2078 words - 8 pages Privatization is not a new phenomenon and has been affecting governments both positively and negatively for many years. Privatization is the process in which a government will sell a state owned enterprise and assets to be privately owned and operated. “The United Kingdom, under the Thatcher government, ushered in the era of privatization in the early 1980s.” (pg3) “The focus on privatization is rooted in the ideological belief that competitive

The Popularity of Soap Operas

5119 words - 20 pages case of some of the American soaps, forming part of a routine for many housewives and mothers. Omnibus episodes at the weekends enable those who are busy during the week to "make good that loss" (Kilborn, 1992: 76). In addition to watching soaps at different times, people watch them for different reasons. Hobson interviewed a group of soap viewers about Crossraods' representation of life in Birmingham. She found that

The Increasing Popularity of Yoga

5010 words - 20 pages The Increasing Popularity of Yoga With an increasing trend in western culture toward the use of alternative therapies, yoga is emerging as a primary means for achievement of both physiological and psychological wellness. Traditional yoga utilizes a combination of both physical and spiritual methods for faciliatation of self-improvement. The origin of yoga has not been clearly identified, however archeaological evidence suggests its

The Popularity of Virtual Gaming

670 words - 3 pages when DiGiovanni was challenged by Mike Sepso to a dual at Grand Theft Auto during a party of a friend. The two were strangers to each other, but after hours of competing a friendship formed. Within two years the friends persuaded the owner of a nightclub to allow them to project video games on a wall for spectators to watch. Eventually they created an underground gaming community that later grew into the largest gaming championships in the world

The 1980s: A Decade of Change

1311 words - 5 pages terrorists in Lebanon,” and members of the administration arranged for the CIA to secretly purchase arms from the Department of Defense (Kornbluh 2). Private individuals bought the arms from the CIA and sold them to Iran in return for its promises of help in the hostage release, but the sales led to the release of only three hostages, and three more Americans were taken hostage during the same period. Administration agents secretly gave profits

Reasons for Australian Federation Question: Discuss the reasons for and against federation that were considered during the late nineteenth century.

958 words - 4 pages One of the key reasons for Federation was to achieve a united defence force which could better protect Australia Reasons for Australian Federation In 1901, the six colonies of Australia federated as a nation. It was, however, a long process, as there were arguments against this idea including the self-interests of different colonies and the size of a new nation if it occurred. Several reasons for federation were considered, such as

indonesia in the 1980s

1344 words - 6 pages of the local economy. It is a common fiscal policy of economies in the global south during the 1980s. State-induced industrialisation through spending is heavily influenced by Keynesian and socialist economic thought, thought to originate with Latin American Structuralism from the 1950s to the 1980s. The road to progress is not always so straightforward. The first 5 year plan (Repelita I – 1969-1974) designated cement and agricultural machinery

Similar Essays

The Popularity Of Gothic Literature During The Romantic Era

1293 words - 5 pages The Gothic elements expressed in Horace Walpole’s The Castle of Otranto were so new and controversial during the Romantic period that it caused an extreme rise in reputation amongst Romantic writers and readers, creating a ground-breaking genre that would remain popular within entertainment today. These literary elements, alongside the turning of a literary age and the unofficial fight for recognition between the Romantic and Gothic writers

Financial Crisis Of The 1980s Essay

1094 words - 4 pages bankruptcy of 1,043 savings and loan associations among the 3,234 savings and loan associations in the USA from 1986 to 1995. Causes of the 1980s and Early 1990s S&L Crisis Generally, one can say that there is no single cause that led to the increase in the failed financial institutions in the USA during the period between 1980s and early 1990s. Preceding to the beginning of the crisis, the laws and rules governing the financial markets were

Analysis Of Hip Hop Dance And Reasons For Its Popularity

1275 words - 6 pages culture since the 1980s with the production of films, television shows and the advent of the Internet. Hip-hop includes many kinds of styles, such as breaking, locking and popping, house and street jazz. It keeps pace with the times and has introduced many modern elements. There are many reasons contributing to the popularity of hip-hop dance. It provides a way for young people to express their feelings and let out negative emotion. It can cater to

The Popularity Of Advertising Essay

2183 words - 9 pages The Popularity of Advertising Advertising is increasing so quickly that it has become unavoidable. Where-ever you go, you can find advertising. For example, it can be found on Trains, Buses, Buildings, Newspapers, Television and even on the side of Football pitches. Advertising also uses a lot of methods, such as Celebrity endorsement, Exotic places, Humour, Catchy slogans and Sex. Advertising has to be strictly