By some estimates, as many as one-fourth of the LBOs between 1987 and 1990 (the first mega- LBO boom) went bankrupt. The data in Table illustrate the extent of the leverage associated with the largest completed LBOs of 2006 and 2007 (the most recent mega-LBO boom). Equity Office Properties and Alltel have been sold. Use the data given in Table to calculate the equity contribution made by the buyout firms as a percent of enterprise value and the dollar value of their equity contribution. What other factors would you want to know in evaluating the likelihood that these LBOs will end up in bankruptcy?

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Top Ten Completed Buyouts of 2006 and 2007 Ranked by Deal Enterprise Value Net Debt Equity Equity %of %of Value of Enterprise Value (EV) Interest Coverage Target Bidder(s) ($ billion) EV EV (S billion Ratio TXU KKR, TPG, Goldman Sachs 43.8 89.5 1.0 38.9 Equity Office Properties HCA Blackstone Sold NA NA Sold 1.6 Bain, KKR, Merrill Lynch TPG, Goldman Sachs KKR TPG, Apollo 32.7 82.4 Alltel First Data Harmah's 27.9 27.7 27.4 Sold 79.2 83.7 NA NA Sold ? 0.8 Hilton Hotels Alliance Boots Freescale Semiconductor Intelsat Blackstone KKR Blackstone, Permira, 25.8 20.8 17.6 75.9 83.5 49.6 Carlyle, TPG BC Partners 16.4 88.9 1.0 Average 27.9 81 1.0