Leveraged Buyout (LBO) is a purchase for a company with external capital for buys it basically bank debt. For obtain this capital its necessary leave like an assurance an actives of the company.
These operations are usually used for investors in the private equity. Private Equity us a finance operation made for specialized institutions, like Blackstone Group, KKR or Carlyle Group. The main function about these institutions is invested in companies what isn’t trading in stock exchange.
The operations about the private equity usually perform with companies that have a stabilized cash flow for deal these future liabilities. Sometimes the operation it has the consequence that leave the securities market for the transmitted company.
The entity who invest is the main owner of the company, usually is temporal because it sell these shares.
Leveraged Buyout it’s based in principle of leverage (credit and capital invest in a finance operation), on the contrary if doesn’t exist leverage the company have tied-up capital.
Some features that companies we have to add are:
- Benefits and stabilized cash flow (like we told before)
- Products and stabilized market share
- Fixed assets for deal the loans
For do a leveraged buyout, one company takes the decision about sale completely or only one part of it. First, we go to the investor bank for do a financing for leveraged buyout. Next, the investor looks all about the conditions, repayment capacity and other conditions. Later, they agree a price and the inversion, and then created the group of lenders. Finally shares are issued for external investors and investor agreed the financing.
– For example in www.desertsun.com we found this article: