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Leverage operations

The Leverage Buy-Out (LBO) is a way of financing a company buy-out that the uses the leverage effect of debt.

This technique originates with the setting-up of a holding company which will finance part of the acquisition through bank debt, which itself is repaid by dividends from the company that has been bought out.

In practical terms, you form (alone or with a pool of partners) the holding company capital with a minimum contribution topped up by a bank loan. Every financial year, the dividends released by the bought-out company are fed back into the holding company to repay the bank debt (a loan which is generally for 6 or 8 years).

- MBO (Management Buy-Out): a company buy-out operation with the financial involvement of the management team in place, with or without bank leverage.

- IBO (Institutional Buy-Out): a company buy-out operation led by an investment fund with or without the support of the management.

- MBI (Management Buy-In): a company buy-out operation with the financial involvement of the management team in place and / or from outside the bought-out company,

- BIMBO (Buy-In Management Buy-Out): a company buy-out operation with the financial involvement of a combined management team made up of managers in place and new managers from outside the bought-out company, with or without bank leverage.

- LBU (Leverage Build-Up): an MBO or MBI operation followed by one or more external growth operations partly financed by bank leverage.

- OBO (Owner Buy-Out): A buy-out operation by the owner who realizes part of his portfolio as part of an LBO.

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