SCHOLES, L. and WRIGHT, M., 2009. Leveraged buyouts and recession. Qfinance, pp.682-686.
• After unprecedented levels of deal activity in 2007, the descent into recession in 2008 has presented
both challenges and opportunities for the buyout and private equity market.
• We will likely see higher failure rates of buyouts as a consequence of highly leveraged transactions
running into difficulties.
• Private equity-backed and larger buyouts appear less likely to fail than other buyouts. Secured
creditors on average recover about 60% of their loans in failed buyouts.
• The increase in general business failure associated with recession introduces opportunities for buyouts
to rescue and turn around these failing firms, with retail sector deals especially prevalent in recent
• Private equity firms can take advantage of the increased supply of failing firms provided that they have
the necessary means (financial and management skills) to turn the businesses around.
• Private equity firms have been less in active in recent years in buying failed firms, though there have
been some significant transactions.
• Buyouts of failed firms are disproportionately more likely to fail again than buyouts from other vendor