What is a good candidate for an LBO?
What is a good candidate for an LBO?
4 The best candidates for LBOs typically have strong, dependable operating cash flows, well-established product lines, strong management teams, and viable exit strategies so that the acquirer can realize gains.
How do you know if a company is a good LBO candidate?
An LBO candidate is considered to be attractive when the business characteristics show sustainable and healthy cash flow. Indicators such as business in mature markets, constant customer demand, long term sales contracts, and strong brand presence all signify steady cash flow generation.
What companies are good for LBOs?
The Riverside Company 99.4%
What is the largest LBO ever?
$32.1 billion
The largest leveraged buyout in history was valued at $32.1 billion, when TXU Energy turned private in 2007.
How do you screen for LBO candidates?
How Private Equity Screens for LBO Candidates
- Hard Assets. Banks lend more cheaply against hard assets as collateral.
- Steady Cash Flows.
- Maturity of Market.
- Low Capital Expenditure Requirements.
- Non-Core Assets.
- Forced Divestitures.
- Non-Core Corporate Divisions.
- Businesses with Sub-Par Management.
What makes Lbos successful?
LBO’s operate on the assumption that the company being acquired has a comfortable level of free cash flow that can be used to pay down the loan used to fund the acquisition. The key drivers of the success of a LBO revolve around the stability of the acquired company’s free cash flow.
What are the three key attributes of an attractive candidate for acquisition via an LBO?
This is called roll-up strategy.
- (1) Strong Cash Flow. LBO sponsors seek candidates with strong, stable and predictable cash flows because of the debt-laden financing structure.
- (2) Strong Asset Base.
- (3) High Growth Potential.
- (4) Efficiency Improvement.
- (5) Low CapEx Requirement.
- (6) Sound Management Team.
Do LBOs still exist?
Today the LBO is common and multiple financing sources and mechanisms abound, though “cash-flow” leveraged buyouts for under $5 million are still unusual.
Is KKR an LBO firm?
Some well-known private equity firms in the business of doing LBOs are Kohlberg Kravis Roberts & Co. (NYSE: KKR), Blackstone Group LP (NYSE: BX), Carlyle Group LP (NASDAQ: CG), Texas Pacific Group (TPG Capital), Bain Capital and Goldman Sachs Private Equity.
What was the first LBO?
The first leveraged buyout may have been the purchase by McLean Industries, Inc. of Pan-Atlantic Steamship Company in January 1955 and Waterman Steamship Corporation in May 1955. Under the terms of that transaction, McLean borrowed $42 million and raised an additional $7 million through an issue of preferred stock.
Why do companies do Lbos?
The purpose of an LBO is to allow a company to make a major acquisition without committing a lot of capital. In the most typical leveraged buyout example, there is a ratio of 90% debt to 10% equity.
Who did the first LBO?
