Saturday, December 30, 2006
What the hell is a Leveraged Buyout (LBO)?
LBO business nature, on a legitimate basis, is a fraud. Not that it is fraud in the conventional sense upheld in the court of law.
In LBO, you need money to be in this business, but not a lot. Let's be honest about it, in fact, you may need more money to open a small grocery shop than you do to buy a $2 billion company. To buy or open a grocery shop, if it costs $20,000, you need $20,000. If you don't have it in cash today, you need to bring it by Tuesday.
But in an LBO, not only do you not have to bring it, you don't have to see it, you don't know where you're going to get it, nobody knows where they got it from. The whole situation comes from absolutely nothing.
But the more you need, of course, the less money you need. In other words, if there's money involved, you don't get involved in this business. This is a business for people who don't have the money, but who know somebody who has the money, but who doesn't put it up either. All they do is buy out somebody else business by injecting much debts into the balance sheet and within a short span of time, resell it to the public with all sorts of decorations.
The rules in LBO business is simple. 1) Never pay cash. 2) Never tell the truth. 3) Never play by the rules.