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  • December 2019 (Revised December 2022)
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TXU (A): Powering the Largest Leveraged Buyout in History

By: Trevor Fetter, Erik Snowberg and Rebecca M. Henderson
  • Format:Print
  • | Language:English
  • | Pages:20
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Abstract

This case is designed to support a lively discussion about the relative merits of shareholder vs. stakeholder perspectives in the context of a company that provides a vital public service that has important environmental implications. The 2007 purchase of TXU, the largest utility in Texas, was the largest leveraged buyout in history. Yet, within seven years TXU was bankrupt. TXU (A) examines the spectacular turnaround of TXU from 2004 through 2007, in which shareholders received a tenfold increase in the share price and the CEO was rewarded with nearly $280 million in compensation in four years. But other stakeholders objected to the company’s strategy of aggressive price increases and building new coal-fired power plants. Amidst growing pressure from regulators, elected officials, and consumer groups the board decided to sell the company to the private equity firms KKR and TPG. TXU (B) covers the period after the transaction and the reasons for the buy out’s failure, including its enormous financial leverage and a “one-way bet” on natural gas prices that exceeded the exposure of any of the world’s largest integrated energy companies.

Keywords

Leveraged Buyouts; Transformation; Insolvency and Bankruptcy; Environmental Sustainability; Business and Shareholder Relations; Business and Stakeholder Relations; Energy Generation; Non-Renewable Energy; Governing Rules, Regulations, and Reforms; Utilities Industry; Energy Industry; Texas

Citation

Fetter, Trevor, Erik Snowberg, and Rebecca M. Henderson. "TXU (A): Powering the Largest Leveraged Buyout in History." Harvard Business School Case 320-064, December 2019. (Revised December 2022.)
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About The Authors

Trevor Fetter

Accounting and Management
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Rebecca M. Henderson

General Management
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Related Work

    • December 2019 (Revised January 2021)
    • Faculty Research

    The Leveraged Buyout of TXU: (B) Energy Future Holdings

    By: Trevor Fetter, Erik Snowberg and Rebecca M. Henderson
    • January 2022
    • Faculty Research

    TXU (A) and (B): Powering the Largest Leveraged Buyout in History

    By: Trevor Fetter
    • December 2019 (Revised December 2022)
    • Faculty Research

    TXU (A): Powering the Largest Leveraged Buyout in History

    By: Trevor Fetter, Erik Snowberg and Rebecca M. Henderson
Related Work
  • The Leveraged Buyout of TXU: (B) Energy Future Holdings By: Trevor Fetter, Erik Snowberg and Rebecca M. Henderson
  • TXU (A) and (B): Powering the Largest Leveraged Buyout in History By: Trevor Fetter
  • TXU (A): Powering the Largest Leveraged Buyout in History By: Trevor Fetter, Erik Snowberg and Rebecca M. Henderson
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