LBO

James Boston · #1 06-09-2005, 09:51 PM

How exactly does this work? Forget the leverage part and the raising of funds. I could see how a fund could buy enough shares to take a controlling interest in a company. But, wouldn't they need to but ALL the shares to take full ownership? How do they do that in what is basically a seller's market?

player24 · #2 06-10-2005, 03:14 PM

[ QUOTE ]
How exactly does this work? Forget the leverage part and the raising of funds. I could see how a fund could buy enough shares to take a controlling interest in a company. But, wouldn't they need to but ALL the shares to take full ownership? How do they do that in what is basically a seller's market?

[/ QUOTE ]

The company's Board of Directors creates an independent special committee which is accountable to the SEC and state regulators to assure that the minority shareholders are treated fairly. The acquiror can squeeze out the minority shareholders (convert their shares to cash) so long as they meet the fairness criteria of the special committeee. Many times, the initial tender offer will be for a minimum of 90% of the shares and the stragglers (non-tendering shareholders) are cashed out in a subsequent transaction.