LEVERAGED DEAL Meaning and
Definition
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A leveraged deal refers to a financial transaction or investment strategy in which significant levels of debt or borrowed capital are used to fund a company's acquisition, expansion, or any other business activity. In such deals, the acquisition or investment is primarily financed through borrowed funds rather than utilizing the company's own capital or equity. The primary objective of a leveraged deal is to amplify potential returns by increasing leverage, which can multiply profits if the investment performs well.
Leveraged deals are typically structured in a way that the borrowing entity, often referred to as the "acquirer," uses the assets or future cash flows of the target company as collateral to secure the borrowed funds. This collateral provides lenders with a level of security in case of default or non-payment. The borrowed capital is then invested in the target company, enabling the acquirer to gain control over its operations, assets, or future revenue streams.
Leveraged deals can take various forms, such as leveraged buyouts (LBOs), leveraged recapitalizations, or leveraged mergers. They are commonly pursued by private equity firms, hedge funds, or other investors seeking higher returns on their investments by utilizing debt financing. However, leveraged deals also carry higher risks due to the potential for heavy debt burdens, interest rate fluctuations, and economic downturns that could impact the repayment ability of the borrowing entity.
Common Misspellings for LEVERAGED DEAL
- keveraged deal
- peveraged deal
- oeveraged deal
- lwveraged deal
- lsveraged deal
- ldveraged deal
- lrveraged deal
- l4veraged deal
- l3veraged deal
- leceraged deal
- leberaged deal
- legeraged deal
- leferaged deal
- levwraged deal
- levsraged deal
- levdraged deal
- levrraged deal
- lev4raged deal
- lev3raged deal
- leveeaged deal
Etymology of LEVERAGED DEAL
The term "leveraged deal" is a combination of the words "leverage" and "deal". Here is the etymology of these two words:
1. Leverage: The word "leverage" originated from the Old French word "lever" which means "to raise". It entered the English language in the 17th century with the meaning of "using a lever to lift or move something". Over time, the term adopted a figurative sense, referring to the act of using a tool or advantage to achieve a desired outcome or a position of power.
2. Deal: The word "deal" can be traced back to the Old English word "dǣl" which means "part" or "portion". It has its roots in the Germanic language family. Originally, "deal" referred to a division or distribution, but it later evolved to signify an arrangement or transaction between parties.
