This thesis investigates why certain ﬁrms become leverage buyout targets by analysing what ﬁrm characteristics act as determinants of the going-private decision. This is done by studying 294 European LBO targets between the years 2000-2018 and contrasting them to a group of ﬁrms that were not taken private. Our ﬁndings show that ﬁrms with high free cash ﬂows and low growth prospects are more likely to become LBO targets and that the tax beneﬁt from leverage may also be an important determinant of LBO like-lihood. Undervaluation and ﬁnancial visibility are not found to signiﬁcantly impact the going-private decision. To assess the logit model’s predictive accuracy, an investment strategy is formed based on estimated acquisition probability in a hold-out sample. Our prediction classiﬁes 16 out of 22 tar-gets correctly but misclassiﬁes a vast number of non-targets as targets. Due to this misclassiﬁcation, it is concluded that the model’s prediction does not beat the market.
|Educations||MSc in Finance and Investments, (Graduate Programme) Final Thesis|
|Number of pages||87|