How could an LBO happen without a bank?

Question was posed to me earlier this week. How could an LBO happen without a bank? Could this happen through seller financing resulting in the structuring of a leveraged loan by the sponsor? How would this play out in practice?

 

Could be that. Also could be some combination of direct lenders, PE firm using their own capital markets team in lieu of a lev fin team, having an affiliated credit fund, putting in bridge financing in the form of a first-out loan, etc.

 
  1. You can go direct to institutional/private placement investors without relying on a banks balance sheet

  2. Seller financing doesn't really make any sense (unless you're talking about a staple from the sellers Bank) because you would literally be loaning from the proceeds of the sale which defeats the whole purpose

  3. Depends on the type of business but you could also securitize the future cashflows/receivables of the business

 

Second point is very wrong. The seller could be happy to loan you funds and clip a coupon on the portion of the proceeds they give to the buyer as debt.

 

In neque eos ipsa. Hic voluptatibus veniam quod est sit.

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