Chapter 13

Structuring a Leveraged Buyout

In This Chapter

arrow Seeing how leveraged buyouts are structured

arrow Distinguishing between the different forms of debt in a leveraged buyout

arrow Understanding seniority and maturity concepts in leveraged buyout deals

arrow Constructing a leveraged buyout model from start to finish

Investment bankers earn their keep by helping client firms make fundamental changes in their structures and operations. Advising firms on the process of structuring leveraged buyouts (LBOs) is an important tool in the investment banker's toolbox.

Leveraged buyouts are deals in which a buyer borrows money (usually a large sum) and uses that money to purchase a target. LBOs are favorite tools by investment bankers and other financial wizards because the returns can be enormous. When you buy another company using borrowed money, the income generated relative to the amount of cash you put at risk can be very large.

Investment bankers also love LBOs because they're tricky deals with lots of moving parts. Companies that want to do LBOs may not have the expertise in all the areas needed ...

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