The benefits of leveraged transactions in health care, if done right, can provide tremendous returns on investment for equity holders. In essence, with small overall increases in enterprise value a fund can double and triple the investor?s returns on investment equity. The challenge to leveraged investing is that if revenues decrease rather than increase, an already constricted cash flow can be overwhelmed by the required debt and interest payments.
For a discussion regarding these leveraged transactions, download Highly Leveraged Investments in Health Care: Growing Concerns and Risks (PDF).
