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What are the advantages and disadvantages of leveraged buyouts (LBOs) and management buyouts (MBOs)? Discuss Dell's...

What are the advantages and disadvantages of leveraged buyouts (LBOs) and management buyouts (MBOs)? Discuss Dell's MBO in 2013. How is Dell performing now as an LBO company?

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Answer #1

Advantages of an LBO :

1. One of the ways to sell the business.

2. Buying the business is return to the equity.

Disadvantages of an LBO:

1. the business is highly levered.

2. Liquidity issues.

3. Downsizing of operations, and employees might lose their jobs.

MBO (Management buyout) is a type of LBO.

Advantages of MBO:

1. MBO are simple and easy to arrange.

2. Confidentiality can be maintained.

Disadvantages of an MBO:

1. Insider trading risks,

2.Difficulties raising fund.

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