Colla, Paolo; Ippolito, Filippo; Wagner, Hannes F. - In: Journal of Corporate Finance 18 (2012) 1, pp. 124-137
We show that the structure and pricing of debt in LBOs mostly depend on a single characteristic of the target firm, pre-LBO profitability. We find a positive relationship between pre-LBO profitability and deal leverage that is consistent with a dynamic trade-off theory of capital structure in...