Characteristics of a Strong LBO Candidate

Posted in Uncategorized by qmarks on October 14, 2010

Certain comman traits of traditional LBO Candidates are

*Strong Cash Flow Generation

*Leading Defensible Market Positions

*Growth Opportunities

*Efficiency Enhancement Opportunities

*Low Capex Requirements

*Strong Asset Base

*Proven Management Team

Business Characteristics that support the predictability of robust cash flow increase a company’s attractiveness as an LBO candidate.

For example, many strong LBO Candidates operate in a mature or niche business with stable customer demand and end markets.

They often feature a strong brand name established customer base and/or long-term sales contracts, all of which serve to increase the predictability of cash flow.

Also 2008 was a good year for testing the volatility of cash flow for potential LBO candidates.

Source: Investment Banking, Joshua Pearl, Joshua Rosenbaum

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