16.4. Conditions for a Good and a Bad Buyout
To realize a successful LBO, it is absolutely necessary that the feasibility conditions are satisfied. Investors will only conclude the acquisition if they are sure the target company will satisfy all of its financial obligations. These conditions can be classified into two groups: generic conditions connected with the target company and specific conditions linked to the financial structure of both the target and the new company.
There are three generic conditions:
- The company should mature enough to guarantee, with a high degree of certainty, the availability of abundant cash flow necessary for debt repayment.
- Target company balance sheets should be full of assets easily used as debt collateral ...
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