LBO question - capital structure
I found the following text in the Rosenbaum/pearl book regarding LBO's:
"During the time from which the sponsor acquires the target until its exit
(“investment horizon”), cash flow is used primarily to service and repay debt, thereby
increasing the equity portion of the capital structure"
My question is: once the buyout occurs, is the debt and equity which is used to finance the LBO now the "new" capital structure of the target company? Or is the PE company the one that lends from e.g. banks and ultimately is in debt?
Yes
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