Impact of the Cost of Debt on LBO Profitability

Abstract

This academic paper will be developing the concept of what a leverage buyout is, and how does the leveraging affect the profitability of these type of acquisitions. Throughout the research paper we will be explaining in depth concepts that will aid the readers to comprehend what happens during a LBO acquisition and how could it impact the outcome of it. Not just analyzing the outcome of the operation, but what are its determinants and how could it be optimize by maximizing the returns at the end of the holding period. All of the theoretical concepts mentioned and explained in the first chapter will be put into practice in order to analyze a model aimed at giving a better understanding on the proposed research question. Trying to produce an accurate leveraged buyout model we have used as historical data the financial statements of telepizza. This has allowed us to recreate a more realistic model. We will also be able to see, if the privateto-public acquisition goes through, how accurate our model was and the potential returns for said deal.