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Ah, the million-dollar question! The "safe" leverage ratio for an LBO can vary greatly depending on a multitude of factors such as the industry, the specific company, and the economic climate. However, based on the most helpful WSO content, a common range for leverage in LBOs is between 60% and 80% of the purchase price.
Remember, the key is to ensure that the company can handle the debt burden and still operate effectively. It's a delicate balancing act, like trying to juggle bananas while swinging from a tree. Too much leverage can lead to financial distress, but too little can limit the potential returns.
As for where to find guidance on such numbers, you can usually find this in industry reports, financial news, and academic studies. But remember, every deal is unique, so these should only serve as a starting point.
Hope this helps, and remember, don't let the numbers drive you bananas!
Sources: Safe leverage / coverage ratio for LBOs during holding period?
Depends on the sector and market size... Seeing mostly 4 - 5x @ 5.5 - 6.0% right now in MM industrials
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