Definition

Noun: A leveraged buyout is a specific type of corporate acquisition. It refers to the purchase of a controlling interest in a company, primarily using borrowed money (debt). The assets and future cash flows of the company being acquired (the target) are typically used as collateral to secure the loans needed for the purchase.

Usage

This term is used in finance, business, and investment contexts to describe a high-risk, high-reward acquisition strategy. It emphasizes the use of significant debt (leverage) to finance the deal. * The private equity firm completed a leveraged buyout of the manufacturing company. * Analysts are concerned about the company's debt load following the leveraged buyout.

Advanced Usage

• Management Buyout (MBO): A specific type of leveraged buyout where the company's existing executives (upper management) use borrowed funds to purchase the company they manage. This is often done to gain control and potentially combat a hostile takeover bid from an external party.
  • The executive team orchestrated a management leveraged buyout to secure the company's future.

Variants and Related Words

• Buyout (n.): The general act of purchasing a controlling share in a company.
• Leverage (n./v.): The use of borrowed capital to increase the potential return of an investment. In the context of an LBO, it refers to the use of debt.
• LBO (n.): A common abbreviation for "leveraged buyout."

Synonyms

• Debt-financed acquisition
• Bootstrap acquisition (informal, emphasizing the use of the target's own assets to secure the debt)

Related Phrases

• To take a company private via an LBO: Describes the process where a publicly traded company is purchased and its shares are delisted from stock exchanges, often through a leveraged buyout.
  • The consortium plans to take the firm private via a leveraged buyout.

Noun

1. a buyout using borrowed money; the target company's assets are usually security for the loan
   • a leveraged buyout by upper management can be used to combat hostile takeover bids