A management buyout (MBO) is a form of transaction in which management teams acquire a firm or its division(s) from its current shareholders. As managers often lack sufficient financial resources, these operations are executed with the help of financial backers known as private equity (PE) firms. The transaction is typically financed with a mixture of equity and debt, the latter being a larger proportion of the total deal value than the former.1
Buyouts first attracted academic attention in the middle of the 1980s. The seminal paper by Jensen (1986) proposed that at the heart of this phenomenon lies the problem of agency costs of free cash flows ...