00:00 Speaker A
In 2015, Dollar Tree paid $9 billion to acquire Family Dollar.
00:05 Speaker A
And just last year, they offloaded it to two private equity firms for a billion dollars.
00:10 Speaker A
Now, you would think that the $1 billion dollars that the PE firm paid for Family Dollar came out of their pockets.
00:16 Speaker A
But that’s there’s a much more shadier approach here. It’s called a leverage buyout.
00:20 Speaker A
Now, in a leverage buyout, it’s the company itself, not the PE firm that takes on the debt.
00:26 Speaker A
So in the case of Family Dollar, what the PE firm did was raise around $1.5 billion in loans, which they used to pay Dollar Tree for the purchase.
00:33 Speaker A
And then they paid themselves and their advisors for, you know, for making the deal happen.
00:41 Speaker A
But what we’re left with, of course, is the company. The company owes billions of dollars to the lenders, which it now has to make whole.
00:47 Speaker A
So Family Dollar is now forced to operate in extreme efficiency, money maxing, I guess, not just to recover from the bad position that they were in,
00:54 Speaker A
but to keep up with the debt payments.