• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

New! BPP Books for ACCA September 2022 Exams are now available, get your discount code >>

LBO

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › LBO

  • This topic has 5 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • May 11, 2021 at 9:33 am #620287
    huiyu98
    • Topics: 30
    • Replies: 25
    • ☆☆

    Good evening,
    May i ask what is the purpose for LBO as i read through the note it is stated that take a public company private, spin off a portion of existing business by selling it and transfer the private property.

    However, I am not clear on the purpose stated. Please help me for resolve my queries. thank you.

    May 11, 2021 at 4:21 pm #620316
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49598
    • ☆☆☆☆☆

    The purpose is for one company to buy another without needing much equity finance because most of the money needed (usually about 90%) is borrowed. One example is a management buy-out where the existing management take over the company – they invest their own money in equity in the new company, but most of the finance needed is coming from borrowings.

    May 12, 2021 at 9:08 am #620383
    huiyu98
    • Topics: 30
    • Replies: 25
    • ☆☆

    Mr John, could i know the further elaboration on take a public company private?
    is it means shift a public company into private status through LBO?

    May 12, 2021 at 4:03 pm #620410
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49598
    • ☆☆☆☆☆

    One reason for an LBO can be to turn a public company into a private company.

    The new company formed will be a private company. If the old company is currently a public company and if the new company is acquiring the whole of the old company then it will have the effect of turning the existing public company into a private company.

    May 13, 2021 at 5:31 am #620465
    huiyu98
    • Topics: 30
    • Replies: 25
    • ☆☆

    Mr John,
    However, usually a private company acquire a public company is to make them become a listed company is it for some benefit? like reduce the listing cost.
    But why under LBO they purchase a public company is to make it become private status?

    May 13, 2021 at 9:17 am #620483
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49598
    • ☆☆☆☆☆

    The most likely reason is that there is a majority shareholder currently who does not want to be forced to comply with the rules applying to public companies, or to be forced to consider the other shareholders. So they form a new private company to buy out the existing public company.

  • Author
    Posts
Viewing 6 posts - 1 through 6 (of 6 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate

If you have benefited from OpenTuition please donate.

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • mannannagpal on Sources of data – ACCA Management Accounting (MA)
  • John Moffat on Discounted Cash Flow Further Aspects, Lease versus Buy – ACCA Financial Management (FM)
  • John Moffat on The valuation of securities – The valuation of equity – ACCA Financial Management (FM)
  • John Moffat on Objectives of organisations – ACCA (AFM) lectures
  • ben920331 on Discounted Cash Flow Further Aspects, Lease versus Buy – ACCA Financial Management (FM)

Copyright © 2022 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy