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10 Most Successful LBOs and Private Equity Buyouts in History

Is the era of the most successful LBOs and private equity buyouts in history long gone, or is there any indication that in the future, we’ll see more of the massive deals that took place just before the sky fell in 2008?

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.

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.

Considering that, it isn’t hard to see why corporate raiders sought to rebrand themselves as ‘activist shareholders’, many of whom are now considered among the 10 Most Successful Investors in the World Today.

10 Most Successful LBOs and Private Equity Buyouts in History

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The reputation of leveraged buyouts (LBOs) and private equity buyouts started to improve in the 1990s. Investors started seeking agreements with companies’ existing board of directors instead of pushing for hostile takeovers. One of the reasons behind this change was the advent of corporate measures to defend against activists, such as the poison pill, a mechanism developed to deter hostile acquisitions. Poison pills generally allow shareholders to buy additional shares of the company at a discount either before or after the merger, making the terms less desirable for any acquiring entity. The deal that was largely responsible for the growth of the practice was Thomas H. Lee Partners’ acquisition of Snapple Beverages, one of the most successful LBOs and private equity buyouts in history (see more below).

With the NASDAQ crash in 2000, buyouts came to a screeching halt. It took three years for investors to start buying again and in 2003 we entered what is commonly referred as the Golden Age of Private Equity. Mega-buyouts in this period saw enormous sums of money changing hands and multi-billion-dollar LBOs were almost daily news. The mind-boggling numbers involved in these transactions illustrated the spending spree investors were on, although none surpassed the legendary RJR Nabisco deal from 1989. Then, 2008 rolled around and it all came tumbling down and nothing was ever the same. However, deals like the Dell buyout in 2013 may very well be a sign that private equity LBOs are making a comeback.

We used several sources in order to determine the 10 most successful LBOs and private equity buyouts in history. Our starting point were lists of the largest buyouts in history, found on Business Insider and Investopedia. From there, we went through every deal in order to determine whether it was a success or a bust. We also found several examples of great LBOs on Forbes. Since it is nigh impossible to calculate the exact profits investors made from these buyouts, we sorted them according to the initial value of the investment. While percentage-wise some are more profitable than others, in terms of total money earned we felt that these offer a fair representation of the most successful LBOs and buyouts ever made. Now, let’s check out the list of most successful LBOs and private equity buyouts in history.

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