A lot of people get confused by the concept of an LBO, or leveraged buyout.
It’s basically just describing the mechanics of how a private equity firm acquires companies using debt to fund a part of the transaction, and then pays down that debt using the free cash flow generated by the business.
But why are LBOs so effective? What are the different ways that a private equity firm can make money through an LBO?
Hear me explain the 3 main drivers of LBO returns.
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