Job Market Paper

This research studies buyout sponsors ’ incentives for taking Leveraged Buyouts (LBOs) public and their subsequent role in corporate control. By and large, buyout sponsors take LBOs public when LBO structure has achieved the most improvement. RLBO firms do not experience accounting performance deterioration after going public. Buyout sponsor’ incentives are more aligned with investors when RLBOs have large relative size to buyout sponsor. The relative size is positively associated with buyout sponsor’s ownership in RLBOs while negatively associated with the likelihood to quick flip a deal. Quick flip leads to poorer subsequent performance and greater probability of bankruptcy. Generally, incumbent buyout sponsors use IPOs to maximize benefits of control through staged sale of cash flow rights and control rights. I find a negative relationship between the buyout sponsors ’ ownership before IPO and the firms ’ long-term value after IPO. Buyout sponsors are more likely to exit from strong cash- flow firms, and they are more likely to sell their stakes through subsequent takeovers in firms with more concentrated ownership