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Some features of potential target firms make for more attractive leverage buyout candidates. For one company to be said that is good candidate for LOB needs to include the following: low existing debt loads, a multi-year history of consistent and reliable cash flows, hard assets (property, equipment, real-estate, inventory) that may be used as collateral for new debt, then the potential for new management to make operational or other improvements to the firm to boost cash flows and temporary market conditions that are depressing current valuation or stock price.
As a percentage of the purchase price for a leverage buyout target, the amount of debt used to finance a transaction varies according to interest rates, the financial condition and history of the acquisition target, market conditions and the willingness of lenders to extend credit to the LBO's financial sponsors and the company to be acquired...
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