LEVERAGED BUYOUT

A leveraged buyout, or LBO is the acquisition of a public or private company with a significant amount of borrowed funds. Characteristics of LBO:
Strong, predictable operating cash flows with which the leveraged company can service and pay down acquisition debt. Mature, steady and even boring as nothing new to do.

LEVERAGED BUYOUT
Characteristics of LBO Contd.
Well-established business and products and leading industry position Moderate Cap-Ex and product development (R&D) requirements so that cash flows are not diverted from the principle goal of debt repayment Limited working capital requirements

LEVERAGED BUYOUT
Characteristics of LBO Contd.
Strong tangible asset coverage Underdeveloped or out-of- favor Seller is motivated to convert his investment into cash or divest non-core subsidiaries, perhaps under pressure to maximize shareholder value Strong management team Viable exit strategy