On October 6, 2016, the Federal Trade Commission (FTC) Premerger Notification Office (PNO) issued an updated position on how parties should calculate the size-of-transaction in leveraged buyouts (LBOs). LBOs are transactions where either the buyer or target takes on new debt that is used to finance the buyer's acquisition of the target, and where the target is used as collateral.

Previously, the PNO held that the new debt must be included in the size-of-transaction calculation only if the buyer incurred, provided, or guaranteed the new debt. Now, however, the PNO requires that any new debt used to finance LBOs, whether incurred, provided, or guaranteed by the buyer or target, must be included in the size-of-transaction calculation.

The PNO reasoned that all new debt should be included in the calculation because regardless of who took on the debt, it served the same purpose of financing the acquisition.

The FTC noted that typical size-of-transaction deductions, like retiring pre-existing debt, are still available.

For more information on calculating the size-of-transaction, see Valuing a Transaction Under the HSR Rules Checklist.