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LBO/OBO

What is an LBO?

It is a financial arrangement allowing, through leverage, to have your shares bought back by a holding company.

Different types of LBO

-LMBO (= Leveraged management buy out): The buyers will be the senior executives of the target company 

-LMBI (= Leveraged management buy in): In this case we find private investors who are buyers

-LBU (= Leveraged build up): Construction of a group merging several activities 

-OBO (= Owner buy out): Allows a manager to buy back part of his professional assets and anticipate a transfer of his business 

-BIMBO (= Buy in management buy out): Here, the investors of the holding company are on the one hand external investors and on the other hand executives of the target company.

Financing of an LBO

-Equity: This operation requires a personal investment 

-business credit: The target company will have to show a certain financial stability, because it is it which will repay each installment thanks to its profits. The banking organization will therefore mainly examine the health of the company.