Ex Ante Review of Leveraged Buyouts

Under current bankruptcy law, a leveraged buyout (LBO) that leaves an acquired company insolvent, undercapitalized, or unlikely to be able to pay back its debts may be later avoided as a fraudulent transfer. This regime, intended to protect the target's creditors, requires a post-hoc valuation of the target long after the buyout and suffers from a number of practical, procedural, and policy problems. This Note proposes an alternative regime to supplant constructive fraudulent transfer litigation: an ex ante review of the proposed LBO by a neutral, third-party appraiser. This proposal ameliorates many difficulties inherent in the current regime.