Abstract: A leveraged buyout (LBO) is the acquisition of a whole company or a division thereof financed with an above average level of debt. From a historical perspective, LBOs saw massive popularity in the 1980s when sleeping, public, large corporations with established market position and massive cash generation were poorly managed by overpaid managers. A typical capital LBO comprises senior debt, subordinated debt, and equity. Unlike LBOs, in a leveraged recap shareholders continue to hold shares in the company: they are worth less per share, owing to the large cash payout. The primary way in which value is created in an LBO is in fact through the use of borrowing to finance the acquisition. LBO analysis is a modelling technique that has several typical uses, such as: obtaining an LBO value for a company; determining the type of equity returns that can be achieved; and establishing how much debt the company can afford to take on.
Publication Year: 2019
Publication Date: 2019-12-12
Language: en
Type: other
Indexed In: ['crossref']
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