Buy, Strip, And Flip
No, it's not a club on the far end of the Vegas Strip.
As the name implies, a "buy, strip, and flip" is often used by investment companies to buy a target company, use the assets to pay off the purchase, and then sell it a short time later in an initial public offering (IPO).
The investment company does not usually spend a lot of time and money to improve the company before selling, but rather uses their talents to identify the right companies to buy that perhaps are undervalued in the marketplace. Known as a leveraged buyout, the investment company might use the cash on hand at the target company to pay for the purchase, or sell off or close what they consider to be non-essential business units. They also might put new management in place to make the company more attractive to future buyers. A little lipstick might not hurt either.
One example from 2006: Bain Capital, KKR and Merrill Lynch purchased Hospital Corporation of America for $32.7 billion, the largest private equity deal ever at the time. Imagine the banking fees.
A few years later, they took it public in an IPO and made bank.
Related or Semi-related Video
Finance: What is an IPO?25 Views
And finance allah shmoop What is an i p o
Well this is a hippo and it has nothing to
do with an ipo Auras Normal humans pronounce it if
both well actually most people just spell it out I
po It stands for initial public offering In the three
words tell the story and i pl refers to a
company who's raising money by selling shares of itself to
the public for the first time a maiden voyage in
public funding if you will Whatever dot com has forty
million shares outstanding after three private rounds with venture capitalists
and private investors it wants to raise money to go
big internationally And for the first time it will offer
shares to joe and jill public And that means that
all of it shares will be tradable publicly on the
open market like on nasdaq or the new york stock
exchange That is the insiders early investors founders et cetera
will be able to just call their broker at schwab
or fidelity or wherever and sell their shares get liquid
and buy themselves a maserati because it's not what everyone
does after a nice meal So whatever dot com sells
ten million shares a twelve bucks each to raise one
hundred twenty million dollars which they can spend to build
out offices all over the world So yeah that's an
ai po and that's Why a company generally wants to
make shares available to the public because once you've made
an initial public offering and you make money off the
sales of your stock you khun by as many hippos
as you like and just remember to feed them three
times a day they get Cranky if they go too 00:01:35.158 --> [endTime] long in between No
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An MBO is a Management Buy Out (a buy out by inside management); an LBO is a Leveraged Buy Out (taking on debt to buy a company).