Introduction

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Part IV describes how consensus is reached during the bargaining process by satisfying the primary demands of the parties involved in the transaction subject to acceptable levels of risk. The chapters in this section discuss the implications of various aspects of deal structuring and how they impact how deals are done.

Chapter 11 outlines the major facets of the deal-structuring process, including the acquisition vehicle and postclosing organization, form of acquisition, form of payment, and legal form of selling entity and how changes in one area of the deal often impact significantly other parts of the agreement. Specific ways to bridge major differences on price also are discussed.

Chapter 12 addresses tax considerations, including alternative forms of taxable and nontaxable structures, and how they impact reaching agreement. This chapter also discusses such accounting issues as how business combinations are recorded for financial reporting purposes and the impact of purchase accounting on financial statements and reported earnings.

Chapter 13 focuses on how transactions are financed, with particular emphasis on financing, structuring, and valuing highly leveraged transactions and the role of private equity and hedge funds in this process. More specifically, this chapter describes how companies are taken private, how leveraged buyouts (LBOs) create value, how to estimate financing capacity, and how to develop exit strategies. Factors contributing to successful LBOs, the implications of poorly constructed deals, and LBO modeling methods also are discussed.