Chapter 5

How Investment Banking Is Used in Leveraged Buyouts

In This Chapter

arrow Understanding why leveraged buyouts are done

arrow Examining the characteristics of target firms in leveraged buyouts

arrow Understanding the importance of cash flow to leveraged buyouts

arrow Finding out how returns on leveraged buyout deals are computed

arrow Finding out how leveraged buyouts are exited

Leveraged buyouts (LBOs) are often viewed as the mystery thriller of the financial world. They've attracted the attention of the media and general public because of the high-profile players involved and the vast fortunes that have been made with them. The most famous LBO of all time was initiated by private equity firm KKR & Co. and involved the purchase of RJR Nabisco. This transaction was the subject of the book Barbarians at the Gate, by Bryan Burrough and John Helyar (Harper & Row), and spawned a movie with the same name.

Hollywood treatment of LBOs makes them seem full of intrigue, but most of the time, they're not all that ...

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