Matt Levine, Columnist

Leveraged Buyouts Lose Some Leverage

Also the Boredom Markets Hypothesis, crypto wash trading, a decentralized Do Kwon manhunt, greenwashing regulation and a perfect memoir.

October 19, 2022 at 6:00 PM UTC

By Matt Levine

Matt Levine is a Bloomberg Opinion columnist. A former investment banker at Goldman Sachs, he was a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz; a clerk for the U.S. Court of Appeals for the 3rd Circuit; and an editor of Dealbreaker.

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There is an important time lag in the financing of a leveraged buyout:

The issue is that the debt market might change between Time 1 and Time 2. If the debt market is very good at Time 1, and very bad at Time 2, then there is a problem: The private equity firm agreed to buy the company using borrowed money, and it could borrow as much money as it needed at favorable rates in the debt market of Time 1, but in the debt markets of Time 2 it can’t borrow that much money at those rates, and the deal no longer makes sense, or at least not at the same price.