Leveraged buy outs

LBO-Definition ,[object Object],[object Object],[object Object],[object Object]

Features of an LBO Candidate ,[object Object],[object Object],[object Object],[object Object]

Leveraged Buy-Outs Unique Features of LBOs Large portion of buy-out financed by debt Shares of the LBO no longer traded on the open market

Leveraged Buy-Outs ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Potential Sources of Value in LBOs

Leveraged Buy Outs Some Examples of LBO’s

Leveraged Buyouts ,[object Object],[object Object],[object Object],[object Object]

Tata-Corus Deal A Brief Analysis

Advantage Tata ,[object Object],[object Object],[object Object],[object Object]

Cost of the Acquisition ,[object Object],[object Object]

Financing the Acquisition ,[object Object],[object Object],[object Object],[object Object]

Financing the Acquisition ,[object Object]

Expected Synergies ,[object Object],[object Object],[object Object]

Valuation of LBOs: The APV Method ,[object Object],[object Object],[object Object],[object Object],[object Object]

In the presence of taxes, Debt adds value since interest payments reduce firm’s tax burden ,[object Object],[object Object],[object Object],[object Object],[object Object]

Illustration of Tax Shields from Debt

Intuition behind the APV method ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

The APV Formula so far ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

The Dark Side of Debt is the Expected Cost of Financial Distress ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Full APV formula ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

APV vs. WACC 􀂄 Use WACC when the project’s debt to equity ratio is known 􀂄 Use APV when the project’s level of debt is known 􀂉 Appropriate for Leveraged Buy Out or High Leverage Transactions 􀂉 Also appropriate to see value separately from financing and operations.

Leveraged buy outs

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Leveraged buy outs