What Is a Leveraged Buyout?

An accomplished attorney with over two decades of experience, Eric Krautheimer serves as partner at law firm Sullivan & Cromwell. During the course of his career, he has successfully worked with an array of clients on a range of merger and acquisition transactions, asset sales, joint ventures and private equity transactions, among others. Eric Krautheimer has also provided representation for firms involved in leveraged buyouts.

A leveraged buyout (LBO) is a corporate financial transaction in which one company borrows a significant amount of money to cover the cost of acquiring another company. The assets of the target company are used as collateral for the loan in addition to the assets of the acquiring company. For a leveraged buyout to work, it is vital for the business being acquired to be a good candidate for growth and profit generation. Considering the level of debt used to finance the acquisition, it is also important for the acquiring company to have predictable and steady cash flows as well as low capital expenditure in order to easily service its debt.

Before an LBO begins, the acquiring company builds a financial model and forecast which covers the next five years as well as predicts the value at the end of the five-year period. This financial analysis is then forwarded to banks and other lenders for risk assessment. The firm then strives to secure sufficient debt in order to maximize returns on equity.

Once the level of debt financing has been established, the model is updated and provisions of the transaction are finalized. The acquiring company is expected to abide by its payment obligations and realize its investment returns from the target company.

Interesting Facts about R.E.M.

A Los Angeles corporate lawyer with 25 years of experience, Eric Krautheimer has represented clients on various legal matters involving mergers and acquisitions. A partner in the Los Angeles office of Sullivan & Cromwell, his areas of specialization include cross-border mergers and private equity transactions as well as sales of private companies, subsidiaries, and divisions. In his leisure time, Eric Krautheimer enjoys listening to R.E.M.

The hit records of famous American rock band R.E.M. dominated the airwaves in the 1980s and still remain popular today. The band, which split in 2011, was composed of Michael Stripe, Bill Berry, Peter Buck, and Mike Mills. Below are interesting facts about R.E.M.

1. Their debut album “Murmur” was named by Rolling Stone magazine as the best album of the year in 1983, beating Michael Jackson’s “Thriller.” This was a great achievement considering R.E.M. was still an up-and-coming band.

2. Before releasing their first single, the band survived on a food budget of $2 per day while touring. R.E.M. had their share of struggles and toured in an old van driven by their manager.

3. R.E.M. released a Christmas single to their fan club every year from 1988 to 2011. The 24 recordings included everything from covers and demos to live performances and holiday classics.