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leveraged buyout Definition

leveraged buyout

noun

Business the acquisition of a corporation by a group of investors using mostly borrowed funds which are secured by the assets of the corporation being acquired

leveraged buyout (LBO) Finance Definition

A transaction by a small group of individuals that turns a public company into a private company. An LBO involves using a significant amount of debt to pay for the purchase. The interest payments on the debt are paid out of the cash flows of the acquired company. Management also may use this technique, which then is called a management buyout. One of the largest LBOs was the LBO of RJR Nabisco in 1989 for $30 billion, which was financed by junk bond sales. See also junk bond and management buyout.