Just curious. Outside of breakage fees for debt, does the capital structure of the target firm matter at all? What are the implications and differences for acquiring a firm that is already levered up or is completely debt free?
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It certainly matters but i don't fully understand your question. If you intend that the business is fully loaded up with debt through your purchase then you end up in the same position, correct? No pre-existing leverage is appealing as a target but I'm paying more for the equity. Bankruptcy level debt is restructurable and the price is low. In my mind, it still comes down to the investment thesis and modeled return based on a full debt load and equity.
See this thread: http://www.wallstreetoasis.com/forums/leverage-relevance-for-lbo-target
TLDR is in theory, it shouldn't matter, but in practice, sometimes it does.
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