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Lecture7 - when to use APV


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Unformatted text preview: cquisition to KKR. 5 Background: What is an LBO? A group of investors buys a company and finances the buyout partly with their own money and partly with debt. First, they create a “shell company”, with no real operations, that holds the investors’ equity. Second, the shell company issues debt for an amount equal to the target’s purchase price minus its equity. Third, the shell company acquires the “target”, and the two firms are really unified in a merger. The new entity’s assets are identical to those of the target firm, but the new firm now carries a...
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