13–17. 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 13–12 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 the 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?

A solution to this problem is available in the Online Instructor’s Manual for instructors using this book.

Table 13–12 Top Ten Completed Buyouts of 2006 and 2007 Ranked by Deal Enterprise Value Target Bidder(s)

Enterprise Value (EV)

Net Debt Equity Value of Equity Interest Coverage

($ billions) % of EV % of EV ($ billions) Ratio TXU KKR, TPG, Goldman Sachs 43.8 89.5 ? ? 1.0 Equity Office Properties Blackstone 38.9 Sold NA NA Sold HCA Bain, KKR, Merrill Lynch 32.7 82.4 ? ? 1.6 Alltel TPG, Goldman Sachs 27.9 Sold NA NA Sold First Data KKR 27.7 79.2 ? ? 1.0 Harrah’s Entertainment TPG, Appollo 27.4 83.7 ? ? 0.8 Hilton Hotels Blackstone 25.8 75.9 ? ? 1.1 Alliance Boots KKR 20.8 83.5 ? ? 1.1 Freescale Semiconductor Blackstone, Permira, Carlyle, TPG 17.6 49.6 ? ? 1.6 Intelsat BC Partners 16.4 88.9 ? ? 1.0 Average 27.9 81 ? ? 1.0