Business and Professional Ethics Journal

Volume 42, Issue 3, Fall 2023

Through Aristotelian Lenses, Potential Reforms of the Leveraged Buyout Model
Preserving Wealth Expansion and Reducing Wealth Transfers and Destruction

The overall objectives of this article are to help the reader see and understand through Aristotelian lenses: (1) positive and negative aspects of the Leveraged Buyout (LBO) business model; and, (2) how LBO practices can be reformed so as to retain positives and reduce negatives. Aristotelian lenses considered are: wealth acquisition through wealth expansion, wealth creation, and wealth transfers; distributive and corrective justice; and, a dialectic analytic process of retaining positives, reducing negatives, and reforming. Key net positive wealth expansion aspects of the model are discussed with respect to: profitability for the owners, managers, and investors of LBO firms; potential productivity improvements on the cost and revenue sides; and, potentially greater credit availability. Negative wealth transfer and destruction aspects with respect to: a relatively high rate of bankruptcies in some countries and in economic downturns; LBO firm gains without responsibility for losses; wealth transfers from employees, creditors, ordinary vs “carried interest” taxpayers; and, damaged wealth expansion and creation capabilities of acquired organizations are discussed. Potential reforms that could reduce negatives, retain positives, and reform the model are discussed.