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leveraged buyout
 

Financial Modeling Lesson: Building a Leveraged Buyout Model (LBO)

Thank you to our friends over at Wall Street Prep, here is a bit more detail on how to build an LBO in case my e-mail didn't give you enough background (remember, as part of the WSO Modeling Series you can get $100 off the Premium Financial Modeling Package or 20% off any other self-study courses...this deal is nowhere else and will expire soon):

Private Equity Analyst vs. LBO Wire

mossy695's picture
IB
(Baboon, 141
 
Points)
 on 4/7/13 at 11:31am

I'm able to get a discounted subscription to PE Analyst and/or LBO Wire. Which one do you feel is better? Do you think that the content is overlapping enough where it doesn't make sense to get both, or do they both add unique value?

FWIW I'll be joining the LevFin group of a BB.

What happens to Investor Relations when a company is taken private?

Raptor.45's picture
(Orangutan, 320
 
Points)
 on 2/14/13 at 5:32pm

Title says it all. Heinz deal today randomly got me thinking. Does IR just get all laid off when a firm gets taken private or do they still exist to talk to investors about the bonds the company has issued?

Growth Equity vs. LBO Shops

ryanmonkey86's picture
IB
(Monkey, 43
 
Points)
 on 6/14/12 at 12:00pm

which is more interesting and respected? growth equity or LBO shops? why?

Analyzing Capital Structure

terminator's picture
(Chimp, 5
 
Points)
 on 6/13/12 at 3:28am

Hi,

I am unsure of how to properly analyse the capital structure of a firm instead of just looking at how much debt and equity the firm has. I need a proper framework. Anyone has any ideas? Is a Leveraged Buyout Model useful as a framework?

Cheers!

Burger King to Return to Public Markets

inews's picture
 
Points)
 on 4/4/12 at 7:41am

Here’s an interesting one.

Just 18 months after being taken private in a leveraged buyout, Burger King Worldwide Holdings, one of the world’s largest fast-food chains, plans to list its shares on the New York Stock Exchange through a merger with Justice Holdings, an investment company based in London.

Burger King…. will receive about $1.4 billion in cash and continue to own about 71 percent of the company.

Questions:
1. Yet another cash deal… do you think these will become more common then stock/cash deals?
2. Why are they doing this? Is some of this just for more marketing so people buy their products?

Here’s the article: http://dealbook.nytimes.com/2012/04/03/burger-king...

Burger King to go public........again

DonVon's picture
IB
(King Kong, 1,914
 
Points)
 on 4/3/12 at 8:41pm
burgerking.png

That's right ladies and gentlemen, only a few weeks after Wendy's surpassed BK at second-in-command behind McDonald's, BK retaliates by now going public for a second time.

Burger King is going public. Again.

Just 18 months after being taken private in a leveraged buyout, Burger King Worldwide Holdings, the world’s second largest fast-food chain, plans to list its shares on the New York Stock Exchange through a merger with Justice Holdings Limited, a London-based investment company.

We've discussed BK's shortcomings in terms of marketing and product, and the degree to which Wendy's is superior has been covered ad nauseam by WSO. This looks like a fail in the making, but maybe BK's second public appearance could give it the spark it needs to get back on its feet.

What Is A Leveraged Buyout (LBO)?

LBO stands for Leveraged Buyout and refers to the takeover of a company that utilizes mainly debt to finance the buyout. Leveraged Buyouts are usually undertaken by private equity firms and rose to prominence in the 1980s.

The company performing the LBO or takeover only has to provide a small amount of the financing (usually around 90% of the cost is financed through debt) yet is able to make a large purchase, hence the name ‘Leveraged’.

The expectation with leveraged buyouts is that the return generated on the acquisition will more than outweigh the interest paid on the debt, hence making it a very good way to experience high returns whilst only risking a small amount of capital.

$1 for a MLB Franchise

Midas Mulligan Magoo's picture
 
Points)
 on 6/21/11 at 12:00pm
gh

It wouldn't be another terrific Tuesday if I didn't bore you guys with my thoughts on the potential sale of my beloved and much maligned New York Mets. I can't help it. Aside from my loyalties, I feel like we are watching a real live hostile takeover/leveraged buyout/pump and dump all rolled into one big soap opera.

When Greenlight Capital boss David Einhorn shoots up Fred Wilpon’s broke and in the red New York Met veins with $200 million worth of capital, he may be a lot closer to owning the prized property outright than anybody imagines.

Future of leveraged buyouts?

ekudofekud's picture
(Chimp, -49
 
Points)
 on 4/24/11 at 11:51pm

http://dealbook.nytimes.com/2011/04/21/blackstone-...

According to BX, leveraged buyouts nowadays aren't worth it. How much of a role do you think LBO's will play in finance in the future?

HCA IPO Rises 4% on Day Dow Falls 228 Points

BankingRUs9's picture
IB
 
Points)
 on 3/11/11 at 12:50am
hca.jpg

HCA Holdings rose about 4.0% in its first day of trading. This was very impressive, considering the Dow Jones Industrial Average fell 228 points in the same day (3/10/11). The Dow fell in response to increasing jobless claims, a larger U.S. trade deficit, a larger Chinese trade deficit, and a lower GDP revision in Japan on 3/9/11. Luckily, HCA was unaffected, which reflects both the strength of the company and its balance sheet. HCA represents such a large share of the U.S. hospital industry, that institutional money managers probably could not refuse to purchase the security for their portfolios. HCA's public competitors include CYH - Community Health Systems and THC - Tenet Healthcare Corp.

High yield bond markets and LBOs

claas's picture
ST
(Baboon, 108
 
Points)
 on 1/15/11 at 5:43am

Hi all,

can someone please explain to me the relationship between high yield bond markets and LBOs as high yield bond markets can somehow finance LBOs?

thanks.

WSO's Most Wanted CEOs

Jorgé's picture
(Neanderthal, 2,182
 
Points)
 on 11/10/10 at 7:12pm
Awesome

Inspired by a recent employer attractiveness survey, Jorge, an obscure yet devastatingly handsome writer for the world’s premiere finance community, Wall Street Oasis, has decided to run a survey on who are the most attractive CEO’s in Wall Street to work for.

Choosing from over 20 nominees from the world’s top banks, consulting, private equity, and fund management firms, monkeys from all over the world will vote in the comments section which 3 of the top CEOs, fund managers, or directors they want to work with the most.

PE recovery?

Midas Mulligan Magoo's picture
 
Points)
 on 7/7/10 at 11:26am
buyout laundry

George Roberts and Henry Kravis are first cousins. I bet their childhood games in post-WW 2 Tulsa, Oklahoma weren't the typical "Cowboys vs Indians" fare. Perhaps they were, with the caveat of Custer buying out Sitting Bull's arrow supply prior to Little Bighorn.

More than half a century later, the visionary duo (leaving Bear in '76, talk about far-sighted) are set to take their legendary buyout firm KKR, public. The 3+ year long journey, which stalled due to the crisis, is now reaching it's end. But can we really take the ending of this drawn out saga as a signal to new beginnings?

Reference Book Recs for PE Associates

stifler's picture
IB
(Monkey, 33
 
Points)
 on 6/27/10 at 3:51pm

Starting as an associate at a middle market private equity firm in a couple of months. They are transaction agnostic (buyouts, recaps, and growth equity).

What are some reference book recommendations to have in my library at the office? - I also don't have a finance/accounting degree, so the technical book recommendations can be basic. I only have two years of ibanking experience.

In addition to technical books, if you have any book recommendations on improving business/finance writing, I would appreciate it.

Thanks for your help.

Buyout Blunders or Distressed Dandies?

Midas Mulligan Magoo's picture
 
Points)
 on 6/25/10 at 10:49am
busted piggy bank

With more stringent FDIC regulations taking hold, buyout shops such as Moelis and Carlyle have taken to purchasing small banks (<$1 billion AUM) in hopes of using them as vehicles for purchases of other distressed lenders. Tighter regulations have led the Federal Deposit Insurance Corporation to award just 2 out 83 of this year's failed lenders to private equity type funds. The remainder were sold to banks already having charters and track records.

KKR backed HCA 4.6 billion IPO, largest 2 years

boutiquebank4life's picture
IB
 
Points)
 on 5/7/10 at 12:04pm

Seems like PE firms may be back in action in terms of exit investments.

May 7 (Bloomberg) -- HCA Inc., the hospital chain bought four years ago in a $33 billion leveraged buyout led by KKR & Co. and Bain Capital LLC, filed to sell shares worth as much as $4.6 billion in an initial public offering.

HCA said it plans to raise a net $2.5 billion of the total by selling new shares and will use the proceeds to repay debt, according to a regulatory filing today. Ed Fishbough, a spokesman for HCA, declined to comment.

Another Leveraged Buyout Question

righton's picture
IB
(Baboon, 102
 
Points)
 on 10/1/09 at 3:58pm
Another Leveraged Buyout Question

I know most LBOs are stock acquisitions, but are LBO transactions ever structured as asset sales? Where the sponsor only acquires certain assets & liabilities from the target.

Does the tax base ever change in LBO transactions?

Also, how do LBOs close when there are minority shareholders holding out? What % ownership is needed to actually delist a company and take it private?

Quick LBO Question

sof_2's picture
IB
(Baboon, 103
 
Points)
 on 3/23/09 at 9:43pm

I need your help understanding one thing:

Why is an LBO analysis seen as setting the floor or minimum valution for a company?

Thanks for your help.

how does a LBO fund work?

tacwnoff99's picture
IB
(Baboon, 143
 
Points)
 on 2/8/09 at 11:40pm

how does a LBO fund work? for example say goldman has a 20 billion LBO fund, i thought LBO deals were funded with 90% debt. is this the 10% capital to be used outside of the debt?

my question is how is the capital of an LBO fund used if leverage is the main funder of these deals.

any help is appreciated. i'm trying to learn. thanks.

LBO book

vikram_eda's picture
IB
(Baboon, 132
 
Points)
 on 10/15/08 at 3:40am

Folks,

Can someone tell me the best book on LBO ?

Sending my list below. I am not sure if anyone has a better book that is more comprehensive and structured.

1.Capital Structure Decisions in Insitutional Buyouts
2.Post-Investment​ Value Addition to Buyouts: Analysis of European Private Equity Firms
Leveraged Buyouts
3.The Complete Guide to a Successful Leveraged Buyout
4.Private Equity Exits: Divestment Process Management for Leveraged Buyouts
5.Structuring a Successful Leveraged Buyout Transaction - The Over-Arching Issues You Need to Know (Executive Reports) (Executive Reports)
6.Exposed to the J Curve: Understanding and Managing Private Equity Fund Investments
7.Value Creation in Leveraged Buyouts: Analysis of Factors Driving Private Equity Investment Performance