Leveraged buyouts have often been funded in ways which appear to reduce the risk and cost of financial distress. Leveraged buyout financing methods include the use of specialist sponsors, strip financing, covenants which require that excess cash flows be paid to debtholders, and debt provisions...

This study documents operating performance changes following 44 of the largest LBOs completed between 1985 and 1989. Contrary to the widely held view that these transactions were marginal, the results show that firms completing LBOs in this period experienced improvements in operating margins...