Leveraged Buyout (LBO)

A Leveraged Buyout (LBO) is a financial transaction where an investor or a group acquires a company using a significant amount of borrowed money, relative to the investor's own equity. The assets of the company being purchased often serve as collateral for the loans. The goal is to improve the company’s performance, increase its value, and eventually sell it or take it public, allowing the investors to repay the debt and realize a profit. LBOs are common in private equity and can substantially increase the risk and potential returns of the investment.