10 Most Successful LBOs and Private Equity Buyouts in History

What are the most successful LBOs and Private Equity buyouts in history? Insider Monkey has recently published an interesting article about this topic. The 1980s saw the beginning of the first private equity boom, which culminated in RJR Nabisco’s acquisition. That period also witnessed the rise of notorious corporate raiders like Carl Icahn, T. Boone Pickens, Kirk Kerkorian and many others. Their hostile takeovers and subsequent asset stripping of companies like TWA earned them the reputation of being ruthless men who didn’t care about anything but the bottom-line.

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The practice of greenmail (essentially a form of financial blackmail) didn’t do much to improve their reputations either. Investors would acquire a significant number of shares in a company in an effort to exert control over its direction, often forcing companies to buy back the shares at inflated prices to ward them off. The tactic wasn’t new; in fact, it was invented by the Romans, who used it to try to pay off barbarians and stop them from sacking Rome. In retrospect, it didn’t work quite as intended.

Now without a further ado let’s see what Insider Monkey has investigated for us. We have picked two items from their list for now.

The first one is Continental Airlines. In sharp contrast to Carl Icahn’s takeover of TWA, which ended in the company being stripped of its most valuable assets and ultimately led to its bankruptcy (while significantly enriching Mr. Icahn), newly formed Texas Pacific Group took the other way in their 1993 buyout of Continental Airlines. By taking a direct, hands-on approach in the daily operations of the company, they managed to turn their initial $66 million investment into a handy $600 million profit. Their handling of the Continental buyout set up a new norm for the subsequent LBO and private equity takeovers that followed in the coming years. Continental is now part of United Continental Holdings Inc (NYSE:UAL).

Snapple Beverages is one of the most-cited buyout stories in history. Thomas H. Lee Partners managed to pull off every activist investor’s dream by buying Snapple Beverages for a mere $135 million, mixing it up a little (and taking it public in the process) and selling it for whopping $1.7 billion just three years later. It is estimated that the deal earned the firm about $900 million in profit; not bad for a three-year deal. Quaker Oats, the company that took Snapple off of Thomas H. Lee Partners’ hands, wasn’t nearly as lucky, as the company didn’t do well under its leadership. Quaker Oats ended up selling Snapple for just $300 million three years later. Snapple has changed hands two more times since and is currently part of Dr Pepper Snapple Group Inc. (NYSE:DPS).

For any further interesting information read Insider Monkey’s article about 10 most successful LBOs and Private Equity buyouts in history

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