
The dynamics of Leveraged Buyouts
INTRODUCTION TO LBO Leveraged Buyouts represent one of the numerous investment techniques adopted within Private equity firms. Throughout this article we will analyze the fundamental pillars of this method. The acronym LBO stands for “Leveraged Buyout”. As the name suggests, this type of financial transactions are related to the leverage. Indeed, it consists in purchasing a target company by a small group of investors using a high level of debt and moderate equity investment. On average it is estimated that the equity contribution is around 40%, while the debt is 60%. Since an LBO is a sophisticated operation, it’s usually promoted by buyout firms. These transactions are generally financed by investors known as Limited Partners (LP) and managed by private equity firms known as General Partner (GP). Limited Partners tend…