LBO Meaning and
Definition
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LBO stands for Leveraged Buyout. It is a financial transaction in which an acquiring company acquires all or a substantial portion of the ownership stakes in a target company, using a significant amount of borrowed money to fund the purchase. The borrowed funds are typically secured by the assets of the target company or its expected future cash flows.
In an LBO, the acquiring company's goal is to use the target company's assets or cash flows to generate enough revenue and profits to repay the borrowed funds and cover the interest expenses. The target company's assets may also be used as collateral to secure the acquisition financing.
The LBO model often involves a high degree of financial leverage, meaning the acquiring company assumes a large amount of debt relative to its equity investment. This allows the acquirer to achieve a higher return on investment if the target company performs well and generates sufficient cash flows to repay the borrowed funds.
LBOs are often undertaken to facilitate the acquisition and subsequent restructuring of a company, typically by a private equity firm. The acquired company may be taken private and reorganized to enhance its profitability before being re-sold or taken public again. LBOs can be complex and involve multiple parties, including lenders, investors, and legal advisors, to structure and execute the transaction successfully.
Common Misspellings for LBO
Similar spelling words for LBO
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