Leveraged Buyout (LBO)

Leveraged Buyout (LBO)

A takeover of a company, using a high proportion of borrowed funds. Generally, the target company’s assets act as the collateral for the loans taken out by the acquiring group. The acquiring group then repays the loan from the cash flow of the acquired company. For example, a group of investors may borrow funds, using the assets of a company as collateral, in order to take over the company. Or the management of a company may use this vehicle as means to gain control of the company.