LBOs: Winners and Losers in the Buyout Game

    by Robert Benjamin

    Corporate mergers and leveraged buyouts (LBOs) occurred at a frenzied pace in 2006, rivaling the record-setting year of 2000 and contributing to the stock market’s substantial gains last year. More than a quarter of these transactions involved private-equity firms seeking to profit by taking publicly traded companies private.

    And so far this year, LBOs are continuing at the same frenetic pace.

    For investors, there have been winners and there have been losers in this unprecedented increase in private-equity activity. In general, high-yield bond investors have benefited from the buy-out boom, public stockholders have seen limited gains, and investment-grade bondholders have been perhaps the most at risk from the overnight downgrading of their holdings.

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