Leveraged buyout (LBO)

Leveraged buyout (LBO),

Definition of Leveraged buyout (LBO):

  1. Acquisition of a firm by raising its purchase price mainly through borrowing secured by the same firms assets. After the purchase, the loan is paid from the firms cash flow and/or by selling off its assets (called asset stripping).

  2. In a leveraged buyout (LBO), there is usually a ratio of 90% debt to 10% equity. Because of this high debt/equity ratio, the bonds issued in the buyout are usually are not investment grade and are referred to as junk bonds. Further, many people regard LBOs as an especially ruthless, predatory tactic. This is because it isn't usually sanctioned by the target company. It is also seen as ironic in that a company's success, in terms of assets on the balance sheet, can be used against it as collateral by a hostile company.

  3. A leveraged buyout (LBO) is the acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company.

  4. The purchase of a controlling share in a company by its management using outside capital.

How to use Leveraged buyout (LBO) in a sentence?

  1. Some companies may try and take on a leveraged buyout when they feel they have no chance of turning things around.
  2. A leveraged buyout is the acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. .
  3. My dad told me that we would be undergoing a leveraged buyout soon, which meant we would be selling it.
  4. The leveraged buyout was the only way the purchase would take place as the firm needed to accept the risk as well as the likely benefit.
  5. In a leveraged buyout (LBO), there is usually a ratio of 90% debt to 10% equity.
  6. One of the largest LBOs on record was the acquisition of Hospital Corporation of America (HCA) by Kohlberg Kravis Roberts & Co. (KKR), Bain & Co., and Merrill Lynch in 2006.
  7. A management buyout or leveraged buyout is a transaction where some individuals borrow large amounts of cash and buy the outstanding stock of all the other shareholders.

Meaning of Leveraged buyout (LBO) & Leveraged buyout (LBO) Definition