Private Equity
Blue Sky Capital Resources Insights - Leveraged Buy Outs: Myths And Misconceptions
May 2020
Recently, I find myself engaged in fascinating conversations surrounding the strategies and thinking behind deal structures specific to leverage. It has been interesting to hear all of the perspectives behind how and why buyers/investors employ leverage. While just about all debt burdens on the transaction spectrum from a fully leveraged buyout at 90% debt to an all cash transaction can find an appropriate case example, I have been troubled by the number of individuals who are operating with a standardized model, never actually performing the specific case optimization work. It is this disconnect between sound reasoning and appropriate case-based application which prompted my interest in composing an article. While the examples and arguments in this article are by no means intended to be an exhaustive representation of the considerations surrounding effective application of leverage as an investment tool, it is my hope to provide enough information to trigger deeper conversations and richer analysis in transaction and balance sheet modeling.
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