Leveraged buyout (LBO)

Definition

A leveraged buyout is a financial strategy where a company is purchased primarily with borrowed money, using the assets of the company being acquired as collateral for the loans. The goal is to make strategic acquisitions without committing a lot of capital upfront, intending to pay off the debt over time from the operations of the acquired company.

Related terms

Debt Financing:

This involves raising funds for business activities by borrowing money that must be repaid at a later date, usually with interest.

Asset: An asset is any resource owned by a business or an individual that has economic value and can be converted into cash.

Acquisition:

This refers to the process of obtaining control of another company either by purchasing it outright or by obtaining its assets