LBO & Paper LBO
Why do private equity firms favor companies with low capital expenditure requirements?
Model answer
Capex competes directly with debt service for cash. Every dollar spent on capex is a dollar that cannot be used to pay down debt or fund interest. A low-capex, asset-light business converts more of…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 1,500+ — or go Pro for unlimited reps.
More from LBO & Paper LBO
- What is a leveraged buyout?
- What makes a company a good LBO candidate?
- What drives returns in an LBO?
- Why does using more leverage increase equity returns (when it works)?
- At a high level, how do you calculate the IRR or money multiple on an LBO?
- Name the three primary value-creation (returns) drivers in an LBO.