Valuation Effects of LBO Announcements on Target Rivals: An Event Study of European Leveraged Buyouts between 2010 and 2016

Abstract: The primary goal of this thesis is to determine whether leveraged buyouts perceptibly affect the stock prices of core competitors of the LBO target. Through the use of an original, meticulously constructed data set, the study aims to augment the scarce and discordant extant literature on the subject. A follow-up cross-sectional test is conducted to provide further insights into the dynamics that may influence the studied valuation effects. Overall, we report zero-mean, insignificant abnormal returns across all relevant event windows, indicating that, on average, rival firms display negligible net valuation effects as a result of leveraged buyouts occurring in their industries. While these findings may seem unspectacular, they do constitute a novel verdict in the literature which simultaneously both challenges and supports previous empirical findings and neatly fits into the existing theoretical framework.