Free Excel Acquisition (LBO and Synergy) Spreadsheet Templates
Leveraged Buyout (LBO)
A leveraged buyout (or LBO, or highly-leveraged transaction (HLT), or "bootstrap" transaction) occurs when a financial sponsor acquires a controlling interest in a company's equity and where a significant percentage of the purchase price is financed through leverage (borrowing). The assets of the acquired company are used as collateral for the borrowed capital, sometimes with assets of the acquiring company. The bonds or other paper issued for leveraged buyouts are commonly considered not to be investment grade because of the significant risks involved. Many large buyouts in the 1980s produced insufficient cash flow to pay the interest of the borrowed capital, giving their bonds "junk" status.
Companies of all sizes and industries have been the target of leveraged buyout transactions, although because of the importance of debt and the ability of the acquired firm to make regular loan payments after the completion of a leveraged buyout, some features of potential target firms make for more attractive leverage buyout candidates, including:
- Low existing debt loads;
- A multi-year history of stable and recurring cash flows;
- Hard assets (property, plant and equipment, inventory, receivables) that may be used as collateral for lower cost secured debt;
- The potential for new management to make operational or other improvements to the firm to boost cash flows;
- Market conditions and perceptions that depress the valuation or stock price.
Synergy Valuation
The idea that the value and performance of two companies combined will be greater than the sum of the separate individual parts.
This term is used mostly in the context of mergers and acquisitions. For example, if Company A has an excellent product but lousy distribution whereas Company B has a great distribution system but poor products, the companies could create synergy with a merger.
Leveraged Buyout Valuation - Template analyzes the value of equity and the firm in a leveraged buyout.
Excel Value of Synergy - Spreadsheet estimates the value of synergy in a merger.
See Other Spreadsheets - Click on the link to see other Spreadsheets.
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