LBO
Leveraged Buyout
Short definition
A leveraged buyout pays a large slice of the price with debt supported by the target’s CFADS. Equity is thin, debt is thick; covenants, cash sweep and interest cover sit at the centre of the design.
Detailed explanation
Debt capacity is stressed CFADS and collateral, not an EBITDA multiple. High rates make an LBO “pretty in the model, impossible in cash”.
APV values the shield separately on a changing debt schedule. The exit multiple and the sweep set equity IRR.
Why it matters for the CFO
In Türkiye high Kd and short tenors make a classic LBO hard. The same logic still describes the debt leg of large acquisitions.
How to read it
Sources & uses and year-one DSCR are the cash test of the story. Exit multiple = entry multiple is optimistic.
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Definitions are educational. They are not investment, credit or tax advice.