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What is a Leveraged Buyout?

A leveraged buyout occurs when members of management use outside borrowed capital to buy a controlling share in the company.

Often times, the assets of the company being acquired are used as collateral for the borrowed capital.

The purpose of leveraged buyouts is to acquire another company without having to commit a lot of working capital up front. In a typical leveraged buyout, you may see a ratio of 90% debt financing to 10% equity used to acquire the company.

Keywords: leverage, capital, controlling interest, debt financing, borrowed capital, leveraged buyout,