LBOs through the Internet
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lbo_alchemy.pdf

Benjamin's insight:

One of the best documents I found on the LBOs and LBO firms.

 

A must read for those who don't know exactly how LBOs work !

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LBO Firms Seen Ratcheting Risk With Dividend Deals: U.K. Credit

Private-equity firms from BC Partners Ltd. to Advent International are selling bonds to pay themselves dividends from their U.K. companies at levels last seen before the credit crisis.
Benjamin's insight:

Issuing bonds to pay dividends:  a classic LBO process. This is not the most important information of this article: it's coming back to what it was before the 2008 crisis.

 

Current level of debt (aka VERY low) allows this manipulation to happen again. Sure, why not?  As “If the use of proceeds begins to favor shareholders over bondholders then average credit quality will decline" we can expect some equilibrium to take place. But what a complicated equilibrium:


The higher the favor to shareholders the higher the cost of debt therefore the lower the dividends therefore the higher the sponsorship of the fund into the company therefore the higher the favor to bonholders therefore the lower the cost of debt...


What will the equilibrium be ?

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Dell LBO to Test Market’s Appetite for Return to Boom Era - Bloomberg

Dell LBO to Test Market’s Appetite for Return to Boom Era - Bloomberg | LBOs through the Internet | Scoop.it
Dell LBO to Test Market’s Appetite for Return to Boom Era
Benjamin's insight:

Will the gigantic LBOs we have known happen again ?

 

This is what everyone is interested in with the possible MBO of Michael Dell with a fund on Dell, Inc. This would require not less than $20bn ! Are we still able to do that kind of thing in the present economy ? No doubt that if this happen it will be the spearhead of the return of massive LBOs. Everyone seems to hope that it will hapen but no one want to take the first step.

 

I remain convinced that the 2004-2007 wave of LBOs was just the begining...

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Hilton Seeks $2.4B in IPO After Franchising 99% of Post-LBO Growth

Hilton Seeks $2.4B in IPO After Franchising 99% of Post-LBO Growth | LBOs through the Internet | Scoop.it
Hilton Worldwide's IPO will be a major coup for Blackstone Group after the hotel chain's 2007 leveraged buyout.
Benjamin's insight:

The famous Hilton LBO ! Blackstone visibly want to sell through an IPO and what a nice "coup" they did there ! But how much of the shares will be set to "floating" ? IPO may not be as liquid as everyone prentend them to be...

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Salins du Midi : un LBO « salé » pour le contribuable - Rue89

Salins du Midi : un LBO « salé » pour le contribuable - Rue89 | LBOs through the Internet | Scoop.it
Savez-vous ce que c'est qu'un LBO? « Leverage buy out »! Rachat par effet de levier. Des actionnaires souhaitent se débarrasser d'une société. Ils conseillent aux cadres de celles-ci, ou à de nouveaux investisseurs, de la racheter en s'endettant.
Benjamin's insight:

Here is a french article that sums up really well what I want to show.

 

The first part is an article describing the process of an LBO being made on a company.

 

The article and quite a lot of comments below criticize the concept of LBO (not all of them with a well constructed argumentation but whatever...).

 

This shows how much the financial "tool" is hated among the population.

 

However the last comment of the page is an employee of a company saying how the employee made a LBO with the help of a bank. The groupwanted to sell/dismantle this company. The employee + the bank did an LBO. They reorganized the company and created value. The company went through an IPO later and everyone in the company was wealthier than before.

 

 

This shows perfectly the opposition you can find in the general opinion and why it is important to have some backup evidence on this subject.

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Michael Dell Said to Consider Blackstone LBO Only With CEO Guarantee

Michael Dell Said to Consider Blackstone LBO Only With CEO Guarantee | LBOs through the Internet | Scoop.it
Dell Inc. founder Michael Dell will only consider backing a buyout by Blackstone Group LP if the private-equity firm guarantees he can remain as chief executive officer, according to a person familiar with the discussions.
Benjamin's insight:

Well well well ! It seems to be more and more precise !

 

Micheal Dell want Blackstone to be the fund to do the LBO but on one condition : he needs to remain the CEO.

 

As we know (do we?) a part of the value created by private equity funds through LBOs comes from the organizational expertise they can bring. Do they believe to be able to work with Micheal Dell as CEO? Will he let them bring their management or has Blackstone just became an institutionnal loaner ?

 

This raise the question that whether is it the management or the ownership (shareholders) that prevent value from being created ?

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Ruby Tuesday Races 7% Higher on LBO Buzz

Ruby Tuesday Races 7% Higher on LBO Buzz | LBOs through the Internet | Scoop.it
The casual dining chain has reportedly hired Goldman Sachs to explore a possible leveraged buyout to a private-equity firm. 
Benjamin's insight:

A rise of 7% in the stock price after the announcement by RubyTuesday that they are looking to be sold (through a LBO maybe ?)

 

This is the kind of evidence that makes me believe that an LBO does not necessarily transfer wealth from the company's shareholders to the private equity fund but might the other way around. Then why would you do an LBO in that case ? Something tells me that an LBO has to create some value, somewhere...

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Jefferies Top Merger and LBO Stock Picks for 2014

Jefferies Top Merger and LBO Stock Picks for 2014 | LBOs through the Internet | Scoop.it
Source: thinkstockLeveraged buyout (LBO) activity within the specialty retail space has heated up over the past year and a half, with the completion of the Rue 21 takeout in October the most recent deal.
Benjamin's insight:

And poeple thought that LBOs were dead ! The liquidity crisis that global economy went through surely affected negatively LBOs, but the monetary policy of the Fed made debt even cheaper than before. I believe LBOs are not dead and we might just see a strong recover !

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