Characteristics of a Strong LBO Candidate
Certain comman traits of traditional LBO Candidates are
*Strong Cash Flow Generation
*Leading Defensible Market Positions
*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