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Private Equity and Venture Capital in Europe by Stefano Caselli

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16.2. Characteristics of a Buyout Deal

16.2.1. Financial structure

An acquisition can be defined as an LBO if there is a change in the property composition and a complete restructuring of the leveraged dimension of the firm acquired. The elements that compose the financial structure of an LBO are senior debt, junior debt, equity, and all operations that create cash flow such as asset stripping and securitization. The distinction between junior and senior debt is based on the time estimated for repayment of the financial obligation and the presence of rights and specific options for the fund providers such as the covenants.

There are also differences between shareholders including their involvement in daily operations of the target company, ...

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