Elon Musk’s Twitter Deal Is Different Than Most LBOs, Here’s How

What’s the easiest way to buy something? With other people’s money. That’s the key to almost all of the leveraged buyouts (LBOs) that have dominated mergers and acquisitions for a generation. Elon Musk’s $44 billion planned takeover of Twitter has had many twists and turns, but after spending months trying to get out of the deal, the billionaire head of Tesla Inc. said he is once again moving forward with the acquisition, which could close as soon as late October. While his take-private of Twitter is an LBO, it differs from most in several important respects.

Musk is playing the role of the private equity firm in this buyout. He’s on the hook to provide about $33.5 billion in equity, or about 72% of the total $46.5 billion in financing, with the remainder coming from a debt package provided by big Wall Street banks. Included in that equity contribution, Musk already owns more than 73 million shares, which are worth about $4 billion at the $54.20 purchase price. A group of 19 investors including billionaire Larry Ellison agreed to cover another $7.1 billion of Musk’s $33.5 billion share. If Musk’s current stake in Twitter is excluded, his proposed purchase would be the fourth-largest deal in which a public company was bought and taken private.