A transaction that involves the purchase (buyout) of a firm financed with a significant amount of debt. The buyer uses the assets of a purchased firm as collateral, while setting plans for repayment of debt using future cash flows generated by the assets. In a leveraged buyout, the buyer holds a controlling interest in the purchased firm, and hence can control its decision making by defining the course of action for the business and restructuring it, including its operations and management.
The main types of leveraged buyout include management buyout (MBO) and buy-in management buyout (BIMBO).
It is known for short as LBO.
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