Leveraged buyouts (LBOs) are perceived as an attractive vehicle for investors to create more value for shareholders.
The news of Walgreens (Baa2/BBB/BBB) potentially going private via the largest leveraged buyout (LBO) in history has brought the LBO strategy back into the spotlight. Although the dollars spent on LBOs in the post-recession era have not come near those
spent in the years leading up to it, the strategy is still prevalent, as seen by the elevated number of LBOs completed last year. Recent high-profile LBOs combined with high-profile defaults by LBO companies justify a revisit on how LBOs work and
why bondholders should be critical of securities related to this type of transaction.