Leveraged Buyout - A Case Study on Unibet Group Plc

Abstract

Leveraged buyout (LBO) is an acquisition where the company is taken out of the public market, becomes private and through different strategies give a satisfactory return to the investors. This specific buyout, known to be highly financed with debt, has been both loved and detested since it first was introduced. However, the amount of LBO transactions has increased in Europe over the last two decades and is now a common part in the investment bank’s daily work. In this thesis, the online gambling company Unibet Group Plc is the target company which I study. The main goal is to come to a conclusion on whether or not Unibet is a suitable candidate for a leveraged buyout. The framework of this thesis contains two different approaches; to search for the characteristics of a well suited LBO candidate in Unibet Group Plc., and secondly to create the LBO valuation model and analyze Unibet Group Plc’s prospects of being a good investment. As it appears, Unibet has many of the characteristics of a well suited LBO candidate; high level of free cash flow, low capital expense requirements, growth opportunity, low financial distress costs and strong asset base. From my self- designed LBO model I can deduce that with the given debt levels, Unibet will be able to repay the loan plus interest expenses and at the same time be able to give satisfactory return on the investment.