What are Leveraged Buyouts and Management Buyouts?
Private equity firms like the Carlyle Group, Kohlberg Kravis Roberts and many others have made huge returns for investors through buyouts. Using financial engineering and a lot of debt these firms buy companies with little money down. While these types of transactions create spectacular returns for investors, they often shortchange the seller and management teams that drive the business. Thankfully, owners and managers can use these same financial tactics to buy and sell their business and have the benefit accrue to them. link How Most Buyouts are Done Private equity firms do hundreds of buyouts a year. Their typical approach is to offer to buy a controlling stake in a company using leverage they obtained from banks based on the financials of that company. Often times these firms commit very little of their own money to purchase the business. With little cash invested, these deals create spectacular returns for the buyout firm. Buyout firms also collect large fees up front, as well as
