How to work a Leveraged Buy Out or LBO - How to Buy a Business - David C. Barnett

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I got a great piece of feedback the other day on YouTube.

Wayne tells me that ‘any idiot’ can put a deal together to buy a business without using their own money otherwise ‘leveraged buy outs’ would not exist.

This week I’ll explain to you what a leveraged buy out is, how it works, and we’ll see if a person with no money could actually pull it off.

I know that you’re all anxious to find out if you’d be an idiot under Wayne’s definition.

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Thank you and I’ll see you next time.

[Zachus]

Lawyers and CPAs will work on a contingency of the deal closing. I know this because I've engaged them with some deals I'm working on.

[nathanlindley]

David, I just discovered you and am LOVING these videos! Totally binge watching! Can you do some videos on success stories? I don't know anyone who has ever purchased an existing business, but know several people who have been scammed. Can you (obviously without breaking any confidences) tell some success stories or some "Watch out for this!" stories?

[warnegoodman]

very clear and concise explanation, thank you for this

[vipindubey]

Thank you sir, the way you explain is awesome
Just want to know about all type of buyout, if its possible then please make a full video on buyout

[ramirras]

Legal fees "can" be done on a contingency basis. Of course, most attorneys want to be paid up front but there are some of there that will do things and get paid at the time of closing. They'll charge more to do this but it's worth it, especially if you have no money to put towards the deal in the first place.

[boydfree]

How about developing lines of credit first, (1) find a deal with equipment land etc, find the liquidation out the liquidation value (2) Offer that as a downpayment (3) find an asset bank and tell them you are going to pay cash for the business and would like to know if they would refinance, buy/ lease back etc, ask for a letter of commitment from them, then take letter to your bank or a bank that understand the business you are trying to buy, see if they will lend you that money for a day for a certain amount of interest or find a private lender to do what is called transactional loan. use your line of credit to pay the interest payment. Have the seller put a lien against your new llc for security. Do you think this would work of course the business has to cash flow in order to do this

[longfordboy]

Nice job! I actually understood this. Thank you

[CatoQassem]

There’s a biz that I’m eyeing with an asking price of $4M

Has real estate—the land and buildings the plant sits on

Something tells me this is the route to go with it

[YCHHUNTOEKOfficialMUSIC]

Thank you Sir, your explanation is very clear

[danykurniawan]

I have been looking for this specific explanation. Thanks

[olitemps]

This was really useful. Great video! Thanks for the content

[yuszakmahya]

Thank you for your explanation. I have some questions.
how to calculate the value of "sellco" at the time of LBO transaction?
Will the bank only look at its tangible assets for funding appraisal?
What if the seller calculates the company's value in excess of its book value?

[blackjesus]

Sorry, complete newbie here. Why are LBOs typically used for bigger deals? Can they not be used to acquire medium sized firms?

[brandoncostner]

Where's the video on Subordinated debt?

[jasonc]

Even if you got collateral you still have to pay the down payment right ? How do you pay for it ?

[marcosj.ferreira]

David, where is part 1 and 2 of this series: 'buy a business with NO MONEY' as you have mentioned to Wayne??? Please send the links. Thank you.

[ramirras]

I do have one question... When doing an LBO where real estate is involved, like in your example, will the finance company treat the deal as a real estate purchase or will they incorporate the land as an asset and lend a percentage of the value? I know if it is treated like a purchase, the bank will want the buyer to pay about 20% of the value, which can be a lot of money out of pocket.

[AaronSmith-rkmn]

It’s hard to do the way you explained in this video.

The best bet is to find a seller willing to sell using seller financing, then you leverage the assets for the DOWNPAYMENT.

[jasonc]

How about the down payment ? How do you pay for it ?

[michaeltabet]

You can you need to get LPs on board. (Preferred share holders)