Buy, Strip And Flip

AAA

DEFINITION of 'Buy, Strip And Flip'

When a private equity firm buys out a target firm (usually with a leveraged buyout) and then sells the target firm in an IPO within a relatively short period of time. Along the way, the private equity firm may take out loans to make special dividends or carry out other actions to improve its own financial situation.

INVESTOPEDIA EXPLAINS 'Buy, Strip And Flip'

Private equity firms typically own and manage a target firm for a number of years. In this time, the company's management and financial situation are improved before the private equity firm cuts the newly-successful company loose with an IPO, at which time the private equity firm earns a nice return for all its work.

In the buy, strip and flip situation, purchased firms are held for only a year or two before the IPO. This usually means that the firm's financial situation is virtually unchanged and, as a result, most of these IPOs do not perform very well.

RELATED TERMS
  1. Takeover

    A corporate action where an acquiring company makes a bid for ...
  2. Sweat Equity

    Contribution to a project or enterprise in the form of effort ...
  3. Buyout

    The purchase of a company's shares in which the acquiring party ...
  4. Mergers And Acquisitions - M&A

    A general term used to refer to the consolidation of companies. ...
  5. Flip

    A point when traders shift from having more long positions to ...
  6. Acquisition

    A corporate action in which a company buys most, if not all, ...
Related Articles
  1. Mergers And Acquisitions: Understanding ...
    Fundamental Analysis

    Mergers And Acquisitions: Understanding ...

  2. The Merger - What To Do When Companies ...
    Investing Basics

    The Merger - What To Do When Companies ...

  3. Trade Takeover Stocks With Merger Arbitrage
    Active Trading Fundamentals

    Trade Takeover Stocks With Merger Arbitrage

  4. The Basics Of Mergers And Acquisitions
    Options & Futures

    The Basics Of Mergers And Acquisitions

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center