takeovers. There were also specific factors at work that affected the attractiveness of highly leveraged deals. In the macro-economy, problems had been mounting, particularly a fast growing national debt, which deflected savings away from the private sector, and decreased the liquidity in the nations banking system. Leveraged Buyouts had peaked in numbers (381) in 1998 and in value ($70 billion) in 1989. In the 1990’s, the numbers remained well below those of the mid-80’s. Signs of an economic slow down that would continue into 1993 did not help. In 1996, there were about 150 completed leveraged buyouts valued at about $33.5 billion, in another wise brisk merger and acquisition market of more than 6,000 transactions that generally relied on much lower levels of leverage than had bee common in the 1980’s.As the millennium approached, it was clear that many of the basic principles of the leveraged management buyout had permeated the corporate economy. In its essence the buyout was a method of creating long-term shareholder value. Value creation was achieved through the creative uses of debt, managerial equity participation, and close monitoring by a dynamic board of directors. Having demonstrated that its basic principleand practice in buyouts could be applied to large corporations, Investment Bankers showed that shareholders could reassert themselves in the boardroom in highly constructive ways. Most importantly, the buyout regime guaranteed that the interests of owners and managers were kept in alignment. In the late 70’s the idea that shareholders would be or could be restored to power in the governance of corporations was obvious neither to their managers nor to the shareholders, or Wall Street for that matter. But during the 1980’s the mere spector of the corporate takeover was prodding more and more executives to undertake internal reforms – in some cases for no better reason than to de...
