Hi, In a management buyout, if the management look to private equity investors to fund the majority of buyout, is it still considered to be highly leveraged? (since private equity investors will get shares in the company, where does the debt come from?) Any thoughts are appreciated.
The management would be borrowing to fund their part of the purchase, and private equity investors typically try to invest the minimum of their own funds, using debt finance for the majority of their investment as well. Benefits of doing this comes from the potential equity upside with fixed debt repayments, i.e. a geared / leveraged investment.
