If a PE firm is going to do a buyout of TargetCo, why does TargetCo's pre-existing capital structure matter? The assets box will stay the same size, but the ratio of liability-to-equity will change because the company will be fully relevered, and existing debt will typically be refinanced. In that case, why is the low-debt a necessary requisite?
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It doesn’t - the transactions are structured as cash-free, debt-free
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