Are there any examples where a company was purchased via a leveraged buyout and the company went on to be more profitable afterwards? Because the only examples I know of resulted in the purchased company going bankrupt fairly quickly.
Hilton Hotels (2007) by Blackstone Group, Despite the 2008 crisis, refinanced and sold with a $14B profit
Safeway (1986) by Kohlberg Kravis Roberts, Restructured, sold underperforming stores, returned to profitability
HCA Healthcare (2006) by KKR & Bain Capital, Strong cash flow supported debt; remained stable and profitable
Dell Technologies (2013), Silver Lake Partners, Went private, streamlined operations, and rebounded strongly
RJR Nabisco (1989) by Kohlberg Kravis Roberts Iconic LBO; despite controversy, generated $53M profit
Not trying to defend PE here, but this narrative doesn't make sense to me.
It turns out that if you kill the goose there's a cache of 3 billion dollars worth of eggs within it.
The goose is gone and everybody made money off of it's demise.
---
PE (not always) is effective at finding under-valued companies and ensuring that they record the value on the PE's books.
But the “works” here is to just make PE richer in the short term, not to actually improve the company in the long term. That short term thinking leads to many impractical decisions that have caused bankruptcies
Second, banks are the primary creditor in these deals, meaning they get paid first. They don't do these deals without ensuring that the company has enough saleable assets to ensure they get their pound of flesh. Lots of companies have billions in pension-earmarked reserves they don't have to pay out on if they declare bankruptcy. Guess who gets first dibs on that cash.
Third, they can shift the risk by selling their interest in these companies to another party. They are not stuck with it forever.
This give you some idea of the volume https://www.ropesgray.com/en/insights/alerts/2025/07/us-pe-m...
No EPL team was purchased with an LBO as far as I know.
Their £790m takeover in the summer of 2005 came by way of a leveraged buyout: when a significant amount of borrowed money is used to fund the acquisition of a company, with the debt secured against that company itself.”
1 - https://www.independent.co.uk/sport/football/manchester-unit...
Most of leveraged buyouts is all about putting debt on the company, selling what you sell and milking it while starving it.
Twitter is yet an unfolding story but it seems to be working.
Keep in mind that a LBO is actually a good deal for the bank, because if the purchased company goes bankrupt, the bank can recoup their investment by liquidating the company.
However, that only works if there are assets to liquidate. This can include physical assets, valuable IPs, or favorable lease agreements. In other words, anything that someone else would want to purchase.
Twitter, being a website, doesn't have a whole lot of assets they could sell. Which meant that other collateral was required for Musk to secure financing.
Ownership of the company itself can be sold, but this only works if there's someone who believes the company was overvalued. Unfortunately for Musk, Twitter's market cap dropped by tens of billions between the time he locked-in his offer and the deal's effective date. It's hard to find banks to fund your LBO when you're paying significantly more than what the market believes the company is worth.
Beautiful turnaround if those figures are reliable, but like Munger calls them, EBITDA tends to bullshit metrics derived by cobbling up bullshit to hide that a company is losing cash.
Just like Figma booking $700M in 2023 profits which was only possible because of the $1b Adobe breakup fee. Proceeded to lose $732m on $749m in revenues the very next year.
We don't have exact insights to X.com's books, but we have credible reports from the Financial Times that they produced over a billion dollars in ebitda in 2024. This is completely possible with a 50% revenue drop. They laid off 80% of the company, something like 6,000 people.
I’m not sure about profit, but I do know that Twitter made $1.4B in profit in 2019 according to their SEC filings.
If the GAAP income is negative, the company lost money last year. End of story.