LBO stands for “Leveraged Buyout”, which is the term used when third-party debt is used to buy a company. In fact, the translation is leveraged buyout. They are a very interesting financial strategy that is not easy to manage.
The objective of these LBOs is to be able to take ownership of a company by putting up as little capital as possible. They are operations that are usually done by Venture Capital and that started to become fashionable in the 80’s, in fact, for those who enter this world it is almost mandatory reading the book Barbarians at the Gate that deals with the LBO on the company RJR Nabisco.
This type of corporate operations with debt what is tried (not always goes well) is to buy a company with debt, but relying on solid cash flows (along with other benefits such as selling production units or being more efficient) that allow to face the debt and thus obtain benefits without having to provide capital, which triggers the return on investment.
This type of leveraged buyout transaction requires a professional advisory with M&A experience. Adding a leveraged instrument only requires more attention to the debt structure. Within this advisory we can find consultants, bankers, industry specialists… But usually lawyers are the backbone of the whole procedure.
For LBOs, the role of lawyers is even more relevant, since they are operations with a higher risk than a typical acquisition or merger. Lawyers have to analyze the legal risks in depth and mitigate them. And in addition to the legal structure, due diligence and document review, there is a moment in which lawyers perform an essential function for the transaction to be successful: the closing.
The law firm in charge of the transaction, usually takes the lead in the negotiation, but it is at the time of closing that the figure of the lawyer as mediator really becomes essential, since almost always in the firms begin to arise asperities or discrepancies of criteria between buyer-seller or parties involved, so it is essential to have a good team of expert lawyers throughout the transaction.
Our experience in M&A and LBO is extensive, including large transactions with different international companies and funds.
In the field of leveraged buyouts (LBO), the importance of expert legal advice is critical to success. At Navas&Cusí, we pride ourselves on our deep experience in mergers and acquisitions (M&A) and LBOs, handling significant transactions with various international corporations and funds. If you are looking for a lawyer specialized in corporate law, our team is fully prepared to provide you with the necessary legal advice and support at every stage of your transaction, ensuring maximum efficiency and security at every step.