LBO EVALUATION

&
SEBI GUIDELINES
FOR TAKEOVERS

LBO EVALUATION
The Discounted Cash Flow approach is
used to value an LBO.

As LBO transactions are heavily

financed by debt, the risk of lender is
very high. Therefore, in most deals they
require a stake in the ownership of the
acquired firm.

SEBI GUIDELINES FOR TAKEOVERS

Features:Disclosure of share acquisition / holding
Public announcement & open offer
Offer price
Disclosure
Offer document

Disclosure of share acquisition / holding

Any person who acquires 5% or 10%

0r 14% shares or voting rights of the
target company should
disclose his
cquisiton
holdings at every stage to the target
company & the stock exchanges
within 2 days of acquisition or
receipt of intimation of allotment of
shares.

Public announcement & open offer

An acquirer who intends to acquire
shares which along with his existing
shareholding would entitle him to
exercise 15% or more voting rights, can
acquire such additional shares only after
making a public announcement to
acquire at least additional 20% of the
voting capital of target company from
the shareholders through an open offer.

Offer price
The acquirer is required to ensure
that all the relevant parameters are
taken into consideration while
determining the offer price & that
justification for the same is
disclosed in the letter of offer.

Disclosure

The offer should disclose the

detailed terms of the offer,
identity of the offerer, details of
the offerers existing holdings in
the offeree company etc.

Offer document
The offer document should
contain the offers financial
information, its intention to
continue the offeree
companys business & to make
major change & long-term
commercial justification for the
offer.

Reference
SUDHINDRA BHAT , 2ND EDITION, FINANCIAL
MANAGEMENT PRINCIPLES & PRACTICE

VANI
2ND M.COM
10545