Busted Takeover

Finance allah shmoop What is an m b o versus

and lbo Okay let's Get their letters right first And

n b o is a management buyout Ngos on their

own aren't all that common But in a given company

inside management might own same thirty percent of the stock

They might partner with another investor who owns a twenty

percent or more And then they might borrow say fifty

percent in debt and take the company private fixit pivot

tweak live with bad quarters for a while without wall

street yelling at him And then they might sell the

company cell or whatever Maybe take it public again will

The distinctive feature here is that the company is already

in place Management is doing the deal and more often

than not essentially all the net worth of the management

will be in the company leveraged when the embryo is

completed And that level of financial commitment really keeps the

team focused Because if things don't work out when they

lose everything your house their car in there Slinky collection

All right next up we have an lbo which is

a leveraged buyout and it just refers to the practice

Of taking on debt to buy a company sometimes with

same management sometimes with different players like an lbo is

a bigger venn diagram set than the embryo thing Well

in an lbo the same basic thing happens But in

a whole bunch of cases management is tossed out The

company wouldn't be quote vulnerable unquote to an lbo Had

management done a good job and kept the company trading

or valued at a high multiple where it would then

be almost impossible to make the risk reward scenario workout

in taking out a whole lot of debt to get

company bought and then turned in the right direction Instead

new management in lbo is usually brought in and resembling

moses noah and other biblical characters and their perceived greatness

and there's a stone tablet with a new set of

commandments Thou shalt be profitable or something like that Arguments

are had at the board level and eventually either the

lbo works and the company has taken public again or

sold for a big price Or it isn't and wrath 00:02:06.63 --> [endTime] has had