Leveraged buyouts

More Definitions for leveraged buyout leveraged buyout Financial Definition of leveraged buyout What It Is A leveraged buyout LBO is a method of acquiring a company with money that is nearly all borrowed. How It Works The basic idea behind an LBO is that the acquirer purchases the target with a loan collateralized by the target's own assets.

Leveraged buyouts

Mergers and Acquisitions A leveraged buyout LBO is the acquisition of a company in which the buyer puts up only a small amount of money and borrows the rest. The buyer can achieve this desirable result because the targeted acquisition is profitable and throws off ample cash used to repay the debt.

Such transactions are also known as "bootstraps" or HLTs, i. Some see them as tools to streamline corporate structures, to rationalize meaninglessly diversified companies, and to reward neglected stockholders.

Others see the LBO as a destructive force destroying economic and social values, the activity motivated by greed-driven predation. These are 1 taking a public company private, 2 financing spin-offs, and 3 carrying out private property transfers frequently related to ownership changes in small business.

Public to Private The first situation arises when an investor or investment group buys all of the outstanding stock of a publicly traded company and thus turns the company into a privately-held enterprise "taking private" in reverse of "going public".

Friendly cases typically involve the management buying the company for itself with plans to operate it thereafter as a privately-held entity.

Hostile cases involve an investor or investor group intent on buying, reorganizing, and then reselling the company again to realize a high return. The sale of the company may be to another company or may be to the public in a stock offering. In the last case the situation actually amounts to a transaction more aptly labeled public-to-private-to-public.

There are other variants in the disposition or in the payback of a third-party investor, although they tend to be rare, such as very high dividend payments and recapitalization by other groups.

Spin-Offs Public or private companies often wish to sell off elements of their business to get cash. In some cases the seller may itself have been bought in an LBO and is spinning off assets to pay the investors back.

An LBO is used to purchase the subsidiary or division in question.

Leveraged buyouts

The fundamental financial logic of such deals, however, remains the same. Private Deals The last situation concerns cases where a privately held operation is bought by an investor group.

Leveraged Buyout | Definition of Leveraged Buyout by Merriam-Webster LBO stands for Leveraged Buyout and refers to the purchase of a company while using mainly debt to finance the transaction.
Leveraged Buyout (LBO) Mergers and Acquisitions A leveraged buyout LBO is the acquisition of a company in which the buyer puts up only a small amount of money and borrows the rest. The buyer's own equity thus "leverages" a lot more money from others.

Such cases often arise when a small businesses owner, having reached retirement age, wishes to divest him-or herself of the company and either cannot find a corporate buyer or does not wish to sell to a company. These people organize an LBO because they only have limited equity.

In acquisitions jargon this is often abbreviated as EBITDA, meaning earnings before interest, taxes, depreciation, and amortization—the component elements of cash flow as ordinarily defined. Because repayment of the large, leveraged debt is from future cash flows of the company.

Leveraged buyouts

Other assets, of course, are also taken into consideration. If cash flow cannot keep pace with repayment, it is desirable that the company has saleable components e.Joshua Pearl is an investment analyst at Brahman Capital Corp.

Previously, he structured and executed leveraged loan and high yield bond financings, as well as leveraged buyouts and restructurings as a Director at UBS Investment Bank in Leveraged Finance More about Joshua Pearl.

May 28,  · Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions, University 2nd EditionFormat: Paperback. LBO stands for Leveraged Buyout and refers to the purchase of a company while using mainly debt to finance the transaction.

Leveraged Buyouts are usually done by private equity firms and rose to prominence in the s. - What Is A Leveraged Buyout (LBO)? LBO stands for Leveraged Buyout and refers to the purchase of a company while using mainly debt to finance the transaction.

Leveraged Buyouts are usually done by private equity firms and rose to prominence in the s. A leveraged buyout (LBO) is a method of acquiring a company with money that is nearly all borrowed. How It Works The basic idea behind an LBO is that the acquirer purchases the target with a loan collateralized by the target's own assets.

Leveraged Buyouts Related Terms: Mergers and Acquisitions A leveraged buyout (LBO) is the acquisition of a company in which the buyer puts up only a small amount of money and borrows the rest.

Leveraged Buyout (LBO)