Leveraged Buyouts (LBOs)

A Leveraged Buyout (LBO) is a financial transaction where a company is purchased primarily using borrowed money (leverage). The buyer, often a private equity firm, finances most of the acquisition with debt, using the company’s assets and future cash flows as collateral. The goal is to improve the company's performance and sell it later at a profit, paying down the debt along the way. LBOs enable investors to acquire larger companies with less personal capital, but they also involve significant risk due to the heavy debt burden.