Risk Adjusted Returns in a Leveraged Buyout
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Authors
Knoechel, Kathryn
Issue Date
2010
Type
Thesis
Language
en_US
Keywords
Alternative Title
Abstract
The concept of risk adjusted returns refines an investment's return by measuring how
much risk is involved in producing that return. This concept is especially prevalent in leveraged
buyouts. In this paper, the corporate structure of a company including senior debt, subordinated
debt, and equity is dissected. These levels are analyzed according to payment priority, structure,
sources, and risk level, and ultimately valued by its required rate of return. Then, the mechanics
of a leveraged buyout are outlined including the basic technicalities, the players, exit strategies,
and possible outcomes. Finally, a case study is used to show the practical applications of a
leveraged buyout. Last summer, I had the opportunity to work at Freeport Financial LLC, which
provides capital and leveraged finance solutions to middle market companies with private equity
investor ownership to support leveraged buyouts, recapitalizations, and corporate refinancing.
The case study is based on a deal that I analyzed while working at Freeport.
Description
39 p.
Citation
Publisher
License
U.S. copyright laws protect this material. Commercial use or distribution of this material is not permitted without prior written permission of the copyright holder.