It can help if it turns an illiquid real estate investment with a liquid software company attached to it into a software company with a lot of cash. There's not much they can do to unlock the real estate value other than borrow against it which is risky.
I suspect that once they have the cash in the banks, activists will push them to "enhance shareholder value" with it, which is more likely share buybacks than anything else. It could still lead to an acquisition.
Unlocking the cash is nominally better than holding onto the building from a buyout perspective in that it saves the buyer the dirty work. If the buyer wants to do an LBO, they can use the cash to finance it. (Strange how that works!)
> If the buyer wants to do an LBO, they can use the cash to finance it. (Strange how that works!)
Agreed. If you can't figure out what to do with your cash, someone else with less insider knowledge and experience will. AKA they'll rebalance your books, make the tough cuts that you can't, point you in a new direction, and exit at 5-10x their initial investment in a couple of years.
It's not turning out that way for Manchester United though. The Glazer takeover simply burdened the club with massive debt, did not change anything in terms of actually running the club, and nobody will ever pay 5-10x what the Glazers did. It just enabled them to siphon money out of the club (as well as using it as a financial dump for sketchy funds, but that's pretty common in the football world).
Leveraged takeovers are often simple cash grabs by plundering buccaneers.
If I borrow 900K to buy a million dollar business, I have only 100K invested in it. Let's say 2 years later I sell the business for 2 million... After paying back the 900K and perhaps 100k in interest I am left with 10x (1 million) of my 100k equity.
Of course if the debt kills the company, we all lose.
>I suspect that once they have the cash in the banks, activists will push them to "enhance shareholder value" with it, which is more likely share buybacks than anything else.
Which is perfectly reasonable. The money belongs to the shareholders, after all. Shareholders are generally happy if their money is going toward new profitable ventures, but they don't normally tolerate big piles of money in the corporate kitty that aren't doing anything. In that case as an investor you'd rather have it disbursed somehow so you can invest it somewhere else.
I suspect that once they have the cash in the banks, activists will push them to "enhance shareholder value" with it, which is more likely share buybacks than anything else. It could still lead to an acquisition.
Unlocking the cash is nominally better than holding onto the building from a buyout perspective in that it saves the buyer the dirty work. If the buyer wants to do an LBO, they can use the cash to finance it. (Strange how that works!)