All Courses
AI Career Planner
1:1 Coaching/Mentoring
Job Board
SQL
HTML/CSS/JS
Coding
Settings
LogoutA leveraged buyout (LBO) occurs when a business or investor buys another company primarily using borrowed funds, such as loans or bonds.
Those loans are generally secured by the assets of the firm being purchased.
In certain LBOs, the debt-to-equity ratio might be as high as 90-10.
Any amount of debt that exceeds this proportion can lead to bankruptcy.
Leveraged buyout is a way in which a company gets acquired. The acquirer takes leverage to fund the buyout. This is mostly a method of hostile takeover. When a company is bought using leverage the buyer plans to pay the leverage using the high amounts of cash held by the company. Which is not very good for the health of the company. Hence companies with huge amounts of cash on balance sheet become a target for hostile takeovers using leverage buyouts.
This is mostly done by private equity firms which mostly takeover companies to sell them further at a profit.