LBO “Love Letter” defined: An LBO “Love Letter” is a slang term used in private equity and M&A circles that refers to a letter sent by a prospective private equity buyer (usually to a public company’s Board) offering to enter into negotiations to acquire the target company through a leveraged buyout (LBO). An LBO Love Letter may also be sent to a private company. LBO Love Letters typically are sent to companies who previously were not actively seeking to sell themselves. (For example, KKR used a Love Letter in 2010 to first approach Del Monte Foods, and eventually led to KKR’s taking Del Monte Foods private through a leveraged buyout / LBO.) Upon receipt of an LBO Love Letter, a company’s Board of Directors has a decision to make, and often leads the Board to hire investment bankers to provide advice on the company’s strategic options, including a formal M&A process or agreeing to a period of exclusive negotiation with the private equity firm that approached it. In doing so, an LBO Love Letter can put the company “in play” and attract rival suitors and M&A bids.
Above is a definition for “LBO “Love Letter”” from PrivCo’s Private Company Knowledge Bank, the definitive online and e-book guide to private companies and private company deals
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