Buy, Strip And Flip


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.

BREAKING DOWN '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.

  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for ...
  3. Private Equity

    Private Equity is equity capital that is not quoted on a public ...
  4. Leveraged Buyout - LBO

    The acquisition of another company using a significant amount ...
  5. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  6. Target Firm

    A company which is the subject of a merger or acquisition attempt. ...
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  1. Can mutual funds invest in private equity?

    Mutual funds can invest in private equity indirectly by buying shares of publicly listed private equity companies, such as ... Read Full Answer >>
  2. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  3. What kind of assets can be traded on a secondary market?

    Virtually all types of financial assets and investing instruments are traded on secondary markets, including stocks, bonds, ... Read Full Answer >>
  4. What does residual value represent in a private equity investment?

    It is common to see a private equity investment's net asset value, or NAV, referred to as its residual value, since it represents ... Read Full Answer >>
  5. Why would a company decide to utilize H-shares over A-shares in its IPO?

    A company would decide to utilize H shares over A shares in its initial public offering (IPO) if that company believes it ... Read Full Answer >>
  6. How do I place a buy limit order if I want to buy a stock during an initial public ...

    During an initial public offering, or IPO, a trader may place a buy limit order by choosing "Buy" and "Limit" in the order ... Read Full Answer >>

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