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The A-Z of LBOs


wealthymatters.comWHAT IS AN LBO?
During mergers and acquisitions, when the buyer borrows money by keeping assets of the target company as collateral to fund the acquisition, it is known as a leveraged buyout (LBO). The borrowed funds could include junk bonds or traditional bank financing. Often a leveraged buyout does not involve much committed capital, as reflected by the high debt-to-equity ratio of the total purchase price (typically an average of 70% debt, 30% equity). In addition, any interest that accrues during the buyout tends to get compensated by the future cash flow of the acquired company.  Read more of this post

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