Abstract
Based on the study of the works of domestic and foreign authors, the article presents a decompositional model of value creation when conducting business acquisition transactions with the involvement of debt capital (LBO), discloses the content of its main elements. Clarification of direct and indirect sources of value creation for debt financing transactions, as well as factors affecting their value, creates a theoretical basis for improving financial analysis and evaluating the effectiveness of LBO transactions, contributing to their development.
Highlights
The leveraged buyout (LBO) was much debated in the wake of the takeover wave of the 1980s when the phenomenon first gained momentum
We present and analyse the recent leveraged buyout of Danish incumbent telecom company TDC A/S (“TDC”) by Nordic Telephone Company ApS (“NTC”) – a consortium consisting of the private equity limited partnerships Apax Partners Worldwide LLP, The Blackstone Group International Limited, Kohlberg Kravis Roberts & Co
In contrast to the takeover forms of merger and acquisition (M&A), the leveraged buyout most commonly relies on the assets of the target to serve as collateral for loan financing, enabling the financial sponsor and/or management to invest in an organisation without having the assets-in-place of a strategic buyer12
Summary
The leveraged buyout (LBO) was much debated in the wake of the takeover wave of the 1980s when the phenomenon first gained momentum. Ever since, it has been blamed for much evil, while its proponents have argued in favour of its efficiency and value creation. 4. What are the sources of gains that determine the likelihood and success of leveraged buyout activity? There is a vast amount of theory discussing leveraged buyouts, most of which was written during, or in the immediate aftermath of, the 1980s’ takeover wave. Considerable emphasis is placed on the determinants of modern leveraged buyout activity
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