May 10, 2020 2:11 am
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Please can someone teach me what LBO is? It makes no sense...
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May 24, 2020 1:36 am
A LBO is a "Leveraged Buyout". This is explained in detail on the private equity page!
But in general, an LBO goes as follows:
- PE company wants to buy "Company X".
- PE company takes out a large loan to help pay the purchasing price of Company X.
- The PE firm buys >50% of Company X (aka a majority stake) using the large loan and some small amount of their own cash.
- Over a 5-10 year span, they own the company and use the cash flow of the company to pay off the debt/the loan.
- After the 5-10 year time frame, the PE firm sells the company and makes a large return having paid off the debt and effectively paid very little of their own cash.
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May 10, 2020 11:19 pm
It's a leveraged buyout - definitely recommend going on this page to learn what it is:
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