What are leveraged buyouts? What are some types of leveraged buyouts? Plz, I need a response within 2 days.?

Question

I need to know what leveraged buyouts are and some types of LBOs? Plz respond within 2days. thnx.

Answer 1

Leveraged Buyouts occur when a public company wants to go private. An outside firm wants to buy all of the stock of the company. The leveraged buyout occurs in the following steps:

1) Equity firm issues bonds in the name of the public company
2) When the cash amount reaches the needed amount, the company becomes private.
3) The private company now has a debt load similiar to a house mortgage.
4) Over the next few years the company will pay off the debt with profit.

Leverage Buyout ==> Mortgages

Some recent ones: Freescale, HCA, Taiwan ASE, maybe even Home Depot.

Answer 2

Another type of LBO is when an outsider purchases a private company with someone else's money.

If person A goes to Bank B and says "both of us will make a lot of money if we buy private "Company C", Person A is leveraging Bank's B's money to buy company C.

Leveraged buyouts received a lot of bad press when Person A's goal was to liqudate Company C's assets and put all the employees out of work while keeping all the profits from the liqudation sales.

For example, if a company is holding real estate valued on their own books as $1,000 and the Real Estate market has appreciated so the building has a market value of $1,000,000.
Person A will offer Company C's owners $50,000 and then sell the Real Estate for $1,000,000 and keep the profit, while throwing all the employees out of work.

You will usually see this action when one generation of owner passes the company to the next generation of owner who can not be bothered running the company. The new owner just wants to sell and accepts the first "good" offer.

Answer 3

good now the enterprise is paying for and merchandising at $40 9.50. which skill the marketplace is pricing in $a million.50 of risk top rate and time value. The stratagey you're conversing approximately is noted as risk arbitrage the place you purchase the objective and short sell the bidder. there is an danger that the buyout will no longer be authorized and the actuality you would be getting the money interior the destiny bills for the $a million.50 low-cost. once you upload leverage and inventory into the mixture, it gets greater complicated as to what ratio you would be paying for and merchandising the each inventory.

Answer 4

https://bluebookacademy.com/courses/financing-decision-b91518d4-1454-4a9f-a899-1a1bc9bb3da7/video/what-is-a-leveraged-buyout