What is one of the key advantages of a leveraged buyout (LBO)?

One of the key advantages of a leveraged buyout (LBO) is the opportunity for long-term strategy execution. In an LBO, a private equity firm acquires a company using a significant amount of borrowed money alongside the firm's equity. This high leverage structure allows the acquiring firm to take control of the target company and implement strategic changes without public market pressures, which could be focused on quarterly performance.

Taking a private company allows management to focus on long-term growth initiatives, operational efficiencies, and strategic investments that may take time to yield results. Unlike public companies that face scrutiny from shareholders and market expectations, LBO-acquired firms can focus on executing their business plans over a longer horizon without the pressures of immediate performance metrics dictated by share price fluctuations. This can lead to more sustainable value creation and potentially higher returns when the company is eventually sold or goes public again.