Leveraged buyout

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Leveraged buyout (LBO)

A transaction used to take a public corporation private that is financed through debt such as bank loans and bonds. Because of the large amount of debt relative to equity in the new corporation, the bonds are typically rated below investment-grade, properly referred to as high-yield bonds or junk bonds. Investors can participate in an LBO through either the purchase of the debt (i.e., purchase of the bonds or participation in the bank loan) or the purchase of equity through an LBO fund that specializes in such investments.

Leveraged Buyout

The acquisition of a publicly-traded company, often by a group of private investors, that is financed with debt. Often, the acquirer in a LBO issues junk bonds in order to raise the capital necessary for the acquisition. A leveraged buyout allows a company to be taken over with little capital, but it can be a high risk endeavor.

leveraged buyout (LBO)

The use of a target company's asset value to finance most or all of the debt incurred in acquiring the company. This strategy enables a takeover using little capital; however, it can result in considerably more risk to owners and creditors. See also hostile leveraged buyout, reverse leveraged buyout.
Case Study Leveraged buyouts (LBOs) became popular in the 1980s when firms such as Beatrice Companies, Swift, ARA Services, Levi Strauss, Jack Eckerd, and Denny's were acquired and then were taken private. With an LBO, a firm's management often borrows funds using the firm's assets as collateral. The borrowed money is used to purchase all the firm's outstanding stock. As a result, a small group of individuals is able to take control of the firm without using any or much of the group members' own money. Following the buyout the new owners frequently attempt to cut costs and sell assets in order to make the increased debt more manageable. Because the group initiating the LBO must pay a premium for the stock over the market price, an LBO nearly always benefits the stockholders of the firm to be acquired. However, investors holding bonds of the acquired company are likely to see their relative position deteriorate because of the increased debt taken on by the company. For example, the leveraged buyout of R. H. Macy & Co. produced a $16 jump in the price of its common stock at the same time the price of its debt securities fell. Most bondholders have no recourse to the increased risks they face because of the greater resultant debt.

Leveraged buyout.

leveraged buyout (LBO) occurs when a group of investors using primarily borrowed money, often raised with high yield bonds or other types of debt, takes control of a company by acquiring a majority interest in its outstanding stock.

Leveraged buyouts, which are often, but not always, hostile takeovers, may be engineered by an outside corporation, a private equity firm, or an internal management team.

References in periodicals archive ?
It reads: "Goldman Sachs provides advice on the full range of strategic transactions, including mergers, sell-side and buy-side advisories, leveraged buy-outs, joint ventures, strategic alliances, anti-raid and raid defenses, fairness opinions and spin-offs, split-offs, divestitures and other restructurings.
Daily slog on the City's bourse, Ever climbing vertiginous debt, Never to be repaid, of course, Leveraged buy-outs, more options yet.
It specializes in large leveraged buy-outs and manages $9 billion worth of funds covering a portfolio of 54 European companies and 12 Asian companies.
He focused on junk bonds and leveraged buy-outs, and the precarious tower of debt their use has created.
This practice specifically focuses on lower/middle market management-led and leveraged buy-outs, special-situation investing, renewable energy and large project financing.
Chairman of Stephen Norris Capital Partners, LLC, Norris has substantial expertise in structuring, negotiating and implementing leveraged buy-outs, cash-flow-based investments and financing strategies in the public and private capital markets
He is specialised in venture debt, ABL lines of credit, term loans, and leveraged buy-outs.
Taylor's answer would be to outlaw highly leveraged buy-outs, such as the one Malcolm Glazer used to gain control of Manchester United.
Firstly it relies on little or no debt, a key issue in current markets as the large leveraged buy-outs will return only when the debt markets fully recover.
And certain sorts of lending - for example, leveraged buy-outs - stopped as companies found it difficult to raise money.
Karr moved from Citibank to Lehman Brothers, the investment banking firm, where he was in charge of the evaluation of corporate real estate portfolios in connection with leveraged buy-outs, restructurings, mergers, acquisitions, due diligence in the formation of investment pools and other syndicated equities, and the underwriting of public real estate offerings.
Johnson, founder and chairman of The RLJ Companies together with The Carlyle Group, RLJ Equity Partners invests in middle-market leveraged buy-outs, recapitalizations, and growth equity.