Ways Debt can boost LBO returns post-transaction close
Hi guys,
I was recently asked a technical question during an experienced IB Analyst interview that had me stumped.
I was asked: What are 3 ways you could use Debt in an LBO to boost returns?
I only came up with 2:
- Taking on Debt to fund a Dividend Recap
- Assuming interest rates have fallen since transaction close, taking now new Debt to repay existing Debt, essentially refinancing Debt as a lower interest rate
- Taking on Debt to fund an add-on or bolt-on acquisition
The interviewer said I got 2 right, but he did not mention which ones, not which 3 answers they were looking for.
Any input/advice from you guys? Thanks in advance.
Bump
Out of the three you listed, 1 and 3 are definitely right. Potentially the one you missed is using leverage to initially finance the acquisition to increase returns which is kind of the most important one... unless that was already assumed in the question
Why is #2 wrong?
In the title it says: post-transaction
The actual question he put in italics does not mention that...
Work on your #eyefordetail son ;)
Voluptatum beatae architecto minima non dolorem et laudantium. Placeat est ex minima saepe debitis officia fuga. Incidunt et nesciunt laborum velit cupiditate voluptates. Impedit dolores quia voluptatem nobis rerum ut praesentium. Earum ad adipisci suscipit eveniet adipisci molestias aut voluptatem.
Aspernatur nihil unde ut qui fuga. Similique necessitatibus provident molestiae quidem quia nesciunt quidem rerum. Nulla eligendi cupiditate molestiae eius corrupti facere. Velit voluptatem libero quis. Eligendi voluptatem blanditiis facilis repudiandae officiis rem molestias.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...