Operating Performance of Nordic Reverse Leveraged Buyouts

Abstract: We hypothesize that the operating performance of reverse leveraged buyouts is related to changes in leverage following an initial public offering (IPO). We test how changes in debt with different maturity affect operating performance for these firms. On average, the reverse leveraged buyouts exhibit superior operating performance during the year prior to the public offering and for the two years following the IPO. Our data further support that operating performance can be explained by changes in long-term debt. However, we do not find the same relation for short-term debt. Finally, these firms also exhibit substantially higher levels of long-term debt as a fraction of total debt compared to their industry peers, both prior and in the years following the IPO.