BUS 082 Lecture Notes - Lecture 15: Capital Expenditure, Headcount, Cash Flow

• School: College of The Sequoias
• Department: Business (BUS)
• Course: BUS 082
• Professor: Porterfield

Document Summary

Target only represents an attractive lbo opportunity if it can be purchased at a price and utilizing a financing structure that provides sufficient returns with a viable exit strategy. Certain common traits emerge among traditional lbo candidates. Reflect entrenched customer relationships, brand name recognition, superior products and services, a favorable cost structure, and scale advantages. Create barriers to entry and increase the stability and predictability of a company"s cash flow. Sponsors seek companies with growth potential, both organically and through potential future bolt-on acquisitions. Profitable top line growth at above-market rates helps drive outsized returns, generating greater cash available for debt repayment while also increasing ebitda and enterprise value. Companies with robust growth profiles have a greater likelihood of driving ebitda. Larger companies tend to benefit from their scale, market share, purchasing power, and lower risk profile. Sponsors seek opportunities to improve operational efficiencies and generate cost savings.