Private equity investors (Buyout funds) can help publicly traded companies purchase all the outstanding shares and turn themselves into private companies through LBOs.
Leveraged Buy Out is a form of Merger & Acquisition (M&A) activity where the asset or cash-flow of the target company is used to secure either bank loans or bond issuance to purchase the outstanding equity of the company.The term leveraged indicates that after the buy out the debt-to-equity ratio is much higher than before the acquisition.Are you the majority owner/senior manager of a listed company who's been denied funding by traditional investors or financial institutions? In fact the in the new capital structure, debt can be as high as 90 pc with 10 pc equity after the transaction.
Challenges
Financial institutions or traditional investors emphasize on liquidity and solvency ratios even if the business generates
A high amount of free cashLack of fund can slow down growth
The firm can lose market-share to competitors due to slow or lack of growth
Shares prices can dip resulting in undervaluation of company
Solutions
Detailed financial statement analysis with special focus on cash flows
Maximizing the company's borrowing capacity if cash flow is sufficient to support additional debts through LBOs
Helping finance existing but underfunded opportunities to ensure robust growth
Benefits
Growth is not hampered nor market share is lost to competitors due to lack of capital
Making sure the firm's true potential is realized and shareholder's wealth is unlocked
Company can be re-listed later after growth has been achieved and additional debts have been extinguished
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