From historic buyout to bankruptcy: a case study on the leveraged buyout of Energy Future Holdings: retrospective considerations on leverage and the macroeconomic environment

Abstract

This thesis examines the historic LBO of Texas-based EFH, formerly TXU, led by PE firms KKR, TPG, and GS in 2007. The $45 billion deal, heavily debt-financed, relied on assumptions of stable energy prices and operational efficiencies. However, EFH faced significant challenges, including the 2008 financial crisis, the shale gas revolution lowering electricity prices, increasing environmental regulations and intensified competition in Texas' deregulated energy market. This case study explores the role of high leverage, shifting macroeconomic conditions, and operational missteps in EFH’s 2014 bankruptcy, drawing lessons on LBO risks and financial sustainability.