LBOs
Hi,
I am doing a thesis on the Changing Trends in LBOs.
I plan to consider the changing trends in Capital Structuring and Pricing of the buyouts.
Any help is welcome.
Thanks in Advance.
-Saurabh
Trending Content
Career Resources
Leverage definitely has come down. Almost in all cases, equity commitment greater than 50% from the sponsor is required. Pricing really depends on the credit and viability of the business, but again definitely higher than the pasts.
Equity committments over of 50%? That seems pretty high. Looking at some recent trends in mid-market, equity has been about 40% of total capitalization over the last few quarters.
Leverage is about 2.5 to 3.0x total. A lot of the first lien debt is now being structureed as ABL instead of cash flow due to the lower rates, but you do not get as much leverage.
Mezz is coming in between 1.0 and 1.5x, depending with 12-14% cash pay 2-3% PIK and warrants of 1-2%; a lot of deals are a mix and match between the three, i.e. 12% cash pay 2 PIK and 2% warrants.
You better have a damn good business model (or pay through the nose) if you want to get mezz debt. As ambitioner said, leverage above 3.5 turns or so is tough to get. Most term loan B's for B/BB credits coming in around L+600, maybe a bit higher/lower depending on story, with 3% floor.
Odio ratione similique hic occaecati fuga aut quasi. Cum et eius quis.
Id laborum vero iusto. Eum quos cupiditate est iste. Voluptatem dolor voluptatem voluptatibus culpa modi quasi.
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...