Category: The Business Buyout Model

Deal Criteria – The Optimum Range of EBITDA

So I think I will do a few posts on deal criteria because people always ask me about it. In this post I will talk about the range of earnings that a company should have for it to be on my radar. I should point out that I always change this criteria depending on the day of the week, my mood, the stock market, and if I’m having a bad day. However I always come back to the same range. There are times when I go sky high end times when I feel like buying this a store down the street. But we’ll have to come back to reality at some point.

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Return on Investment – Don’t Bother With It

ROI = return on investment. It’s the very first thing you learn as an MBA. It is also a widely used yet blatantly overrated measure of performance for any investment in a company. In our case ROI has been used over the years to describe the desired percent return on an investment in a leveraged buyout. For example most private equity firms seek to achieve an ROI of greater than 33% per annum on any common equity dollar invested in their portfolio holdings. However, ROI can be used to analyze any investment.

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Buyout Techniques Are Not New

Royal Little was the founder of Textron and of course Textron was a company that built itself through acquisitions. He also founded a small buyout company that did structured deals with many layers of debt and equity (ie. an LBO). The This was in the 1960’s. Read it and you will realize who the father of leveraged buyouts might be.

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