Questions from text book Mergers, Acquistions and Other Restructuring Activities
ID: 441983 • Letter: Q
Question
Questions from text book
Mergers, Acquistions and Other Restructuring Activities, 7th Edition
ISBN-13: 9780123854872
Author(s): DePamphilis, Donald
Chapter 13 Discussion Question 8
13.8: Qwest Comminications agreed to sell its slow but steadily growing its yellow pages business, QwestDex, to a consortium led by the Carlyle Group, and Welsh, Carson, Anderson, and Stowe for $7.1 billion. Why do you beleive the private equity groups found the yellow pages business attractive? Explain the following statement: "A business with high growth potential may not be a good candidate for an LBO"
Explanation / Answer
QuestDex is considered is an attractive company for the private equity groups because it is growing at a steady pace with highly predictable cash flow. Besides this, it has strong management team with strong willingness to continue with the business. The business would grow with the growth in population of the market.
Although high growth in business is not considered to be good LBO candidate, due to high reinvestment requirements for working capital, R&D investment, and new plant and equipment investment. High re-investment rate could not be inhibit the ability to pay down debt to pay down debt incurred to take the business private.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.