Explore Dual Citizenship in Africa | Citizenship Benefits & Requirements
Genesis of the merger
1.
2. The SPV (TATA TEA GB) leveraged this equity to gear up significantly higher debt to buyout the target company.
3.
4. The LBO seemed to have inherent advantages over cash transactions.
5. Te debt was paid off by the SPV through the target company’s own cash flows.
6. The target company’s assets were pledged with the lending institution and once the debt was redeemed, the acquiring company had the option to merge with the SPV.
7. Thus, the liability of the acquiring company was limited to its equity holding in the SPV.
8. Thus, in an LBO, the takeover was financed by the target company’s future internal accruals.