Talk:Leveraged buyout/Archives/2012

Example

Can someone give a simple example of how LBO worked? —The preceding unsigned comment was added by 24.6.208.159 (talk • contribs) 18:46, 11 January 2006 (UTC)

My simple LBO explanation works like this - use the assets to come up with the down payment, use the cash flow to pay the debt. The key is a company with lots of unencumbered assets, little or no existing debt and good, steady cash flow's.

Hmm such as Microsoft ? What is the record for the smallest relative amount of equity in a LBO ? Kristian Joensen 20:43, 24 May 2006 (UTC)

Definition

Here's one thing I'm not clear on - does a "leveraged" buyout necessarily involve encumbering the target in some way after the acquisition? Or does it cover any buyout where part of the money is raised by debt?Arthur Markham 19:19, 22 October 2006 (UTC)

Discrepency

"KKR is credited by Harvard Business School as completing what is believed to be the first leveraged buyout in business history, through the acquisition of Orkin Exterminating Company in 1964." -- According to the entry for KKR, the firm wasn't founded until 1976. 156.56.168.64 04:59, 27 February 2007 (UTC)

KKR seems to have done it's first LBO in 1977. It does appear that Orkin was the first documented LBO, done in 1964, when it was purchased by Rollins, Inc. Henry Kravis was still in school in 1964.Robiecraig 17:15, 24 April 2007 (UTC)

Criticisms

Is there really no one out there apart from me who sees a downside to this? Why no criticisms section.

Whoever edits this should say a word or two about "barbarians at the gate" which refers exactly to LBO and KKR. my english aint good enough to do that, sorry.

Should it be accused of embezzlement? why not?

Absurd claims far from being objective

This article makes a number of largely absurd claims and is far from being objective. Take this one as an example:

"A reduced share price makes a company an easier takeover target. When the company gets bought out (or taken private) - at a dramatically lower price - the takeover artist gains a windfall from the former top executive's actions to surreptitiously reduce share price. This can represent tens of billions of dollars (questionably) transferred from previous shareholders to the takeover artist. The former top executive is then rewarded with a golden parachute for presiding over the firesale that can sometimes be in the hundreds of millions of dollars for one or two years of work. (This is nevertheless an excellent bargain for the takeover artist, who will tend to benefit from developing a reputation of being very generous to parting top executives)."
Apart from being wildly wrong and exaggerated, I believe words such as "takeover artist", "surreptitiously", "questionably transferred" should have no place in a Wikipedia article.

How does the author draw the conclusion that a share price can just be defined by management and that if they do it they can just arbitrarily pick a "takeover artist" who buys them out. Ever heard of managements being fired for stock underperformance? Ever heard of board of directors? Sorry, this is truly very wrong.

And this is just an example. The article is full of comments that give the impression the writers believe LBOs are some sort of evil thing.

Any objections if I have a strong go to phrase many things in a more neutral way? Jaeljojo (talk) 15:10, 15 July 2012 (UTC)

I actually just deleted this because it was silly. If we have a source providing a neutral analysis of this issue, without such stupid words as "takeover artist" etc., then that would be great. TheSoundAndTheFury (talk) 17:30, 15 July 2012 (UTC)

Thanks. I rewrote the management buyout piece. I do not think we need too many references for the concept itself here as there is tons of literature on the topic. What would be helpful are numbers (how many fail, how often ...), does anyone have such numbers? The sections "Failures" and "LBO analysis" are not much better though. Maybe we need to have a go at the entire article? Anyone feels responsible for the entire article - do not want to step on anyone's toes ... Jaeljojo (talk) 21:35, 15 July 2012 (UTC)

Rewrote introduction

I rewrote the introduction in an attempt to make it more neutral and of a reasonable level of detail for an introduction. Many things in the previous introduction were not of general truth the the writer had claimed (i.e. prepayment conditions of high yield bonds) and such level of detail is not needed in the intro anyway. If you feel parts are missing now of the spin is wrong, please let's discuss. Jaeljojo (talk) 22:51, 19 July 2012 (UTC)

First up I'd say: definite improvement. Then secondly - suggest reading WP:LEAD which discusses this. The current introduction may be a bit too dense and detailed for the kind of general introduction we are mostly looking for. I'd like to help, just have to find a minute to sit down and focus on it. Specific suggestion: Don't have the bullet points, don't have a diagram, and keep it to four paragraphs. TheSoundAndTheFury (talk) 14:52, 20 July 2012 (UTC)

All fair points and thanks. Will work on it.Jaeljojo (talk) 15:15, 20 July 2012 (UTC)