THE THRIVING LBO Since Houdaille Industries went private in 1979 in
the first major leveraged buyout (LBO) of a public company, the LBO has
become a standard financing tool. At a time when few LBOs ever passed
the $100 million mark, the $355 million Houdaille Industries deal marked
the origin of a new market. The LBO business has prospered, perhaps
beyond even its founder's wildest dreams. The total market has
grown from $2.9 billion in 1981 to $16.7 billion in 1985. And, last
year, Beatrice Co was taken private by the LBO specialist firm, Kohlberg
Kravis Roberts, in a record transaction totalling $6.2 billion.
While many economists predict that the proliferation of LBOs is
destined to drown the US economy in a flood of unmanageable debt, LBO
investors apparently are unalarmed by the prospect. Also, declining
interest rates have made leveraged buyouts easier to finance. Lower
financing...
