Leveraged Buyout

Sammanfattning: Leveraged buyout transaction is the most familiar PE investment technique in financial market. It is controversial for high debt financing since some companies go to bankruptcy for it, and some companies achieve another boom. Debt financing is cheaper than equity financing, and tax shield would also be attractive for choice of high debt capital structure. Potential LBO companies should be mature, stable cash generation since high debt induces high interest payment. Thus cash flow plays important role in LBO transaction, many company goes to bankruptcy due to interest payment delay.