This sort of acquisition is typically called an LBO or Leveraged Buy Out. The story gets into the details of key figures involved, including Henry Kravis who people today would better know for his private equity firm KKR.
Basic formula is raise cash using junk bonds, buy company, fix up company or kill off costs, use money company earns to pay debt, sell company. Since you have leveraged, your payout can be large.
It's a similar style financing activity to a house flipper.
example: buy house for 1M, but pay $200K + 800K debt (mortgage). Fix up house, sell for $1.2M. Pay off $800K debt. You're left with $400K, or 100% return!
Yep! Always helps when you have sweat equity or some clever idea.
LBOs can have other formats. Take Debt, assign debt to part of the company, auction off arms, legs, kidneys of company to pay off debt... you're left with a shell of your former company but a boatload of cash to pay off the debt and everyone gets their bonuses.
Unfortunately a lot of LBOs tend to result in job cuts. The Twitter deal was a bit of that sort of thing, and we all see where that went.
(https://en.wikipedia.org/wiki/Barbarians_at_the_Gate)
This sort of acquisition is typically called an LBO or Leveraged Buy Out. The story gets into the details of key figures involved, including Henry Kravis who people today would better know for his private equity firm KKR.
Basic formula is raise cash using junk bonds, buy company, fix up company or kill off costs, use money company earns to pay debt, sell company. Since you have leveraged, your payout can be large.
It's a similar style financing activity to a house flipper. example: buy house for 1M, but pay $200K + 800K debt (mortgage). Fix up house, sell for $1.2M. Pay off $800K debt. You're left with $400K, or 100% return!