Leveraged Acquisitions: Technical and Financial Issues

The main purpose of the chapter is to analyze the technical, financial and fiscal issues associated with leveraged acquisitions. Leveraged buyouts represent a crucial deal class in the area of structured finance. In particular, these types of transaction refer to a class of extraordinary financial operations within the larger “family” of mergers and acquisitions (M&A) transactions, expression qualifying those deals that produce deep and permanent changes in the ownership structure of one or more enterprises. Leveraged acquisitions involve the constitution of a “vehicle company” (also called “special purpose vehicle”, “new company” or, simply, “newco”) for the transfer of the ownership and, in this case, the acquisition occurs “off balance sheet” for the proponent subject. Leveraged acquisitions have been the subject of extensive discussions, especially with reference to their financial structure and the financial performance of the companies involved. Furthermore, leveraged acquisitions have experienced a number of legal and fiscal challenges strictly connected to the interpretation of their technical and financial structure. In this chapter, the authors want to provide a vision as complete and critical as possible of this kind of operations, in the knowledge that a partial approach to the topic could lead to conclusions too simplistic or, eventually, vitiated from preconceived notions and judgments of value.