LiveZilla Live Chat Software

What Is A Leveraged Buyout?

Leveraged buyouts are commonly used in the process of business acquisitions. So, what is a leveraged buyout? A leveraged buyout is defined as an acquisition that takes place with a blend of equity and large amounts of borrowed money.

Put simply, the answer to the question: What is a leveraged buyout? It’s when a company is bought out and the buyer uses money that is largely from loans to pay the seller. The debt ratio of leveraged buyouts varies depending on the risk of the buyout. If a company has very steady cash flows and is a secure and stable company, the debt can reach peaks of 100%. Usually, for mid-market companies, the loan amount is a multiple of 3.5 times historical EBITDA.

Why is a leveraged buyout beneficial for equity sponsors? Financial sponsors are looking for higher leveraging, as higher leverage can increase returns. Also, using more leverage can result in more shares to be allocated to management through option programs.

To summarize what is a leveraged buyout, it’s an acquisition that is financed by a high percentage of borrowed money. The buyer can be the management team, an equity sponsor or even a strategic acquirer. Over the last three decades as the private capital markets have grown, large private equity funds have emerged that specialize in leveraged buyouts. Many of these funds focus on using the financial engineering techniques to acquire public companies and to take them private. This allows them to accelerate growth and help companies become more efficient.

What We Offer
  • Corporate Finance Expertise
  • Vast Practical Experience
  • Legendary Customer Service
Latest M&A Industry Updates!
  • Current trends in Lower Middle M&A Market and Middle-market Mezzanine!
Get a Free Consultation!
  • Mezzanine Funding Solutions
  • Advisory Services
  • End-to-end Acquisition Services
Get a Free Consultation

* Fields marked with an asterisk are mandatory


From Our Blog

Special Recent Posts

The Research is in: Here’s How to Have a Happier and More Productive Business Environment
Why Search Funds need a Debt Advisor

Why Search Funds need a Debt Advisor

October 10th, 2017

Search equity funds are a growing force ... read more

Overcapitalization to the Rescue

Overcapitalization to the Rescue

October 9th, 2017

Winning in business involves having enou... read more

© 2017 AttractCapital, LLC All Rights Reserved.