Leveraged Buy-Out

Leveraged buy-outs involve an acquiring company purchasing a target company with the purchase price financed through the use of debt. Private equity firms pioneered leveraged buy-outs in the 1980’s. Their access to abundant debt capital allowed them to become a major force in the world of finance over the past 30 years. Attract Capital’s founding vision was to bring a level of debt sourcing efficiency to private companies in middle market. Our experience was that many private companies had difficulty raising leveraged buy-out capital to finance acquisition activity. At Attract Capital, we engineered a lending solution that allows private companies to finance acquisitions.

Our lending platform enables companies to quickly and efficiently secure leveraged buy-out loans. If properly structured, a mezzanine loan provides all of the funding needed to execute a leveraged buy out. Our solution has been refined over the last 25 years and simplifies the mezzanine loan sourcing process. The Attract Capital solution is built upon our proprietary structuring tools, presentation tools, and connecting tools. These elements work together seamlessly to deliver high value financing on an expedited time-frame for our clients.

Leveraged buyout is the acquisition of company through borrowing debt capital. In the middle market, leveraged buyout refers to a private company being acquired by either a founder-owned company or a private equity owned company. In both cases, the acquisition is a leveraged buyout to the extent the buyer uses leverage such as bank loans, unitranche loans or mezzanine debt loans to fund part of the purchase price. The term leveraged buyout rose in national prominence in the late 1980’s during the peak of the junk bond era when corporate raiders were using high yield bonds to takeover public companies and convert them to private companies. While this type of M&A still occurs, leveraged buyouts today occur in the form of private equity and founder-owned led company buyout s where an owner is selling to another competitor in the market. Leveraged buyouts, due to their use of extensive levels of debt capital to fund the purchase price, produce high returns especially when the buyer only invests a small amount of equity capital in the transaction. Buyers can sometimes invest only 15% or 20% of the purchase price and offload the rest of the purchase price to debt providers. This structuring maneuver creates tremendous returns for them as equity value increases and the leverage is paid down.