Published
White Paper

The Leveraged Buyout extracted value by compressing cost structures that expertise-intensive firms could not shrink without losing the judgment that held them together. For four decades, that constraint defined the boundary of the firm. Human cognition was the scarce, expensive, irreducible input — and the LBO optimised around it.

You're buying a driver-based business. You're getting a driverless one.

This paper argues that the collapse in the marginal cost of cognition — driven by general-purpose AI — dissolves the constraint that made the LBO work. When judgment becomes abundant and near-free, the Coasean boundary of the firm expands: activities previously contracted out because coordination costs outweighed scale economics snap back inside. We formalise this shift as the Intelligence Buyout (IBO): acquire the asset, rebuild the decision layer, multiply the cash flow. The IBO is not an LBO with AI bolted on. It is its successor.

We map the Coasean boundary shifts across four firm activities, develop a simple pricing model for IBO-eligible assets, and contrast the IBO and LBO on entry multiple, value-creation mechanism, and terminal economics. The framework is tested against India's expertise-intensive services sector — a market priced as if cognition remains scarce, in an economy where it no longer is.