Online Course Preview | Leveraged Buyouts (Online) at Columbia Business School

An LBO is a transaction structure whereby the payment, or consideration for the target or selling company, consists of a significant portion of the debt. Our course will be organized into six modules, with each module answering a question about LBOs.

Our first question will be, what is a leveraged buyout, or LBO?

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Our second question is, what are the exit strategies available to monetize the investment?

Our third question will be, how are LBOs financed?

Fourth, we'll consider the credit cycle and its impact on the availability of LBO financing.

Fifth, we'll consider how creditors decide to invest in LBO instruments.

Finally, question six will address what a successful LBO looks like.

But before we begin, I want to discuss three important concepts that I have found to be true over the course of my professional, legal, and investment banking career, where I help my clients, private equity clients included, buy and sell businesses.

First, "If you don't know where you're going, any road will take you there." This paraphrases Alice's conversation in Alice in Wonderland with the Cheshire Cat, Lewis Carroll Alice in Wonderland.

Second, a quote from Jonas Salk, "What people think of as the moment of discovery is really the discovery of the question."

Third, and finally, "I could teach my dog to be an investment banker over a long weekend." This is attributed to Herbert Allen in a Forbes interview he gave in 1996. Herbert Allen is the founder of the investment bank, Allen & Company.

So what's the point? The point here is whether you're new to LBOs or have experience either as an advisor, buyer, or seller, the most important thing is to be curious and ask the right questions. Remember, people are at the heart of every deal. Spreadsheets and modeling do not create an investment thesis, and they don't create synergies, people do.

So let's take a 30,000-foot view of the six questions we will be addressing. We'll look at those again in our course, so we'll know the road we're taking.

First, what's an LBO or leveraged buyout?

Second, what are the exit strategies available to monetize the investment?

Third, how are LBOs financed?

Fourth, what are the credit cycle and its impact on the availability of LBO financing?

Fifth, how do creditors decide to invest in LBO instruments?

And finally, what does a successful LBO look like?

So there you have our six questions. I will lead our discussion on the first two questions and my colleague, Ellen Carr, will cover questions four through six.

So now that we have a roadmap of where we're going, the right questions to ask, and a long weekend to get it all done, let's go and I'll see you in our video where we'll discuss what is an LBO.