Italy: Purchase power
A well-known acquisition structure currently used by private equity players is that of the so-called 'merger forward leveraged buy-out' (LBO) i.e. the structure whereby a target company is acquired by a newly-incorporated company, which to this purpose incurs a certain indebtedness in order to raise the financial means to perform the acquisition, and then, once the acquisition has been performed, merges with the target. The result of this is that the cashflow generated by the activity of the target company may be used, due to the confusion of the respective assets and liabilities resulting from the merger, for the repayment of the indebtedness incurred by the newco to perform the acquisition itself.
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