Leveraged buyouts

At the same time, many formulators face increasingly difficult financial situations. Scotts leveraged buyout in 4986, as a prominent example, cost 2f f million (of which an investment-banking firm financed 490 million). This debt was blamed for the f f % fall in Scotts stock share price from June 4999 to June 2000. ... 

In a series of articles in 2001, Butler, Samdani, and McNish described the increase in LBOs in the chemical industry over the second half of the 1990s (Butler, P. Samdani, G. S. et al.). They labeled this phenomenon the Alchemy of Leveraged Buyouts and predicted a natural convergence between traditional chemical corporations and their new financial competitors in terms of management procedures and skills as well as how they created value. 

We find it helpful to consider the value creation process for leveraged buyouts along three dimensions transaction timing, value generation mechanisms, and the sources of value, linked to investor characteristics. This approach offers an entry point to understanding the interdependencies between the individual levers described above, and the overall process of buyout value generation. 

Leveraged buyouts have become an important part of the chemical industry and it seems that the spate of deals in the late 1990s will pick up speed. Financial investors have good reasons to invest in chemical companies and the top players have developed a set of value generation mechanisms that let them achieve above average results. 

Samdani, G. Sam, Butler, Paul, McNish, Rob. 2001. The Alchemy of Leveraged Buyouts. 

Butler, Paul, Samdani, G. Sam, McNish, Rob. The Alchemy of Leveraged Buyouts. In Budde F., Farha G.A., Frankemolle H., Hoffmeister D.F, Kramer K. (Eds.), Value Creation Strategies for the Chemical Industry. Pp. 93-107. Weinheim, Germany Wiley-VCH Verlag. 2001. 

United States, for instance, through the leveraged buyout procedure, a few strong-minded individuals have succeeded in taking over large petrochemical and thermoplastic production units considered until then as the rightful field of the industry s greats. 

Leading large specialty chemical companies wiU be those which put in place a lean, investor-type corporate center and act on levers similar to those used by the leveraged buyout fund managers or private equity players such as KKR, Cinven or Investcorp. We could compare this to a multi-internal LBO approach across businesses. Key levers are ... 

Composite of US publicly traded chemical companies TRS (capital appreciation plus dividends) Includes leveraged buyout fund investments in later stages (e.g., MBO, LBO,... 

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