Martin Fridson

LBOs squeezed till the pips squeak


The leveraged buyout (LBO) industry rests on a reasonable premise: many businesses have unrealised earnings potential. The reasons vary. Some have been under-managed by family owners. Others have languished as divisions of mammoth public conglomerates, overseen by executives with no material financial stake in their success.

An LBO sponsor uses privately raised equity to buy such a company, which it leverages aggressively. The sponsor provides strategic advice to the acquired business and

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