Leveraged Buyout
In 80's it was the soul of yuppie era. To raider a megacorporation with junk bonds, was considered genius touch. Pure magic to takeover a greater corporation, and set up your own board of directors overnight. Stock markets spot these sound operations. The term leveraged buyout is related to takeover operations with risky strategy. Usually meaning a minor company making a takeover bid for a major company, based in sophisticated banking mechanics to finance it.
In 80's junk bonds were the stars. Junk bonds are related to securities of middle and small cap corporations. They do not stand at the same grade of a blue chip stock. Are risky securities, with restrict liquidity, and therefore can skyrocket even more. Large corporations shares normally have a stable performance. Whenever a junk bond has a continuous high, beyond any math, can cash it for a leveraged buyout use. A raider can make a tender offer even against some blue chip to be paid with these junk bonds.
Problem is that a corporation is not only stock performance and aggressive investment bankers. Even with a takeover is made complete, there's a problem related to management. Not in terms of CEO and board of directors outstanding stars. Each corporation has an expertise and know-how within its markets field. Experience that tells what works and what does not. It's not related only to corporate finance, treasury, and banking magic. Leveraged buyout does make a shakeout over the corporation, and the entire market. But does not always mean a holding with specific and enough expertise to manage afterwards.
Today, still leveraged buyout magic are on the stage. Sometimes one operation following another. Like when a corporation takeover a first one, and then use assets of the first one to finance a takeover against a second one. Complex banking play. But today these moves are not new anymore, and there's a lot of investment bankers and attorneys familiar with all this world.
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