Lieu of commercial airline travel

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Reference no: EM133124435

A recent academic study finds that firms that have been acquired by private equity investors in a leveraged buyout (LBO) transaction on average have 40% smaller private jet fleets than similarly sized publicly traded firms in the same industry. Further, firms often sell some private jets shortly after being acquired by private equity investors. 

The private jets are used by employees (typically senior management) in lieu of commercial airline travel. 

For clarity, the following table is a hypothetical example. 

Firm

Industry

Annual Sales 

Ownership  

Private Jets

ABC Corp

Widget Manufacturing 

$300 Million 

Private Equity

6

XYZ Corp

Widget Manufacturing 

$300 Million 

Public Equity

10

Explain why firms owned by private equity investors own fewer private jets than firms owned by public equity investors. 

Reference no: EM133124435

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