Buyouts by Financial Form

Instructions and help about Buyouts By Financial

[Music] hey guys kieran king here today we are talking about leveraged buyouts or lbos a mechanism for essentially buying a company used by mainly private equity firms now you may have heard of leveraged buyouts or lbos before in the press and probably not in the most positive light and i'm going to talk to you about why a bit later on but first let's dive into the concept and learn a little bit about it in short an lbo leverages the acquisition company's assets to obtain debt finance to buy the company as opposed to buying it with full equity now if that means gibberish to you then let's look at an example john has a company xyz company that he has run successfully for 30 years the company is quite stable and does about 15 million in pre-tax revenue every year after tax which is say a third of his revenue so minus 5 million of tax his net revenue is 10 million a year now this company has other assets like factories and machineries too crucial things needed to make the business tick jo