Innovation and R&D investments by leveraged buyout companies in times of crisis

Fabio Bertoni (1) , Anne-Laure Le Nadant (2) , Frédéric Perdreau (3)

1 EM - EMLyon Business School
2 CREM - Centre de recherche en économie et management
3 COACTIS - COnception de l'ACTIon en Situation

We study innovation and R&D investments made from 2008 to 2010 by UK companies that were the targets of leveraged buyout (LBO) in previous years. We find that overall, LBO companies do not exhibit lower innovation and R&D investments than non-LBO companies during the crisis, with other things being equal. However, innovation and R&D investments decline substantially in LBO companies that were financially constrained before the deal. We argue that in unfavorable market conditions, LBOs tend to exacerbate the issues related to investments in innovation in firms facing financial constraints.

Mots clés: Leveraged Buyouts; innovation; research and development; economic crisis; private equity; financial constraints

Domaines: Economies et finances

Fabio Bertoni, Anne-Laure Le Nadant, Frédéric Perdreau. Innovation and R&D investments by leveraged buyout companies in times of crisis. Economics Bulletin, 2014, 34 (2), pp.856-864. ⟨halshs-01006395⟩