The Aftermath of Corporate Restructurings: A Comparison of Kroger and Safeway 30 years later

After several leveraged buy-out (LBO) waves in the last four decades, controversy remains around whether LBOs create value. This paper is timely in that thirty years have passed since the first wave of LBOs, permitting the examination of the long-term impacts of corporate restructuring. We re-visit the comparison of Safeway and Kroger by employing a longer-term and more holistic perspective. In our longitudinal comparative analysis we incorporate agency based, resource-based, and behavioural based perspectives. Furthermore, we examine the value of leveraged recapitalizations as a substitute for LBOs. We find evidence for the argument that, although LBOs create positive short-term gains, leveraged recapitalizations create more value than LBOs when examining a longer time horizon for both shareholders and other stakeholders. LBOs and leveraged recapitalizations also have differential impacts on their long-term business strategy, internationalization strategy, ownership, and governance structure.