Definitions for "Leveraged Buy Out"
A takeover usually financed by bank debt and low quality bonds with the cash flow and assets of the acquired company used as security. The success of an LBO depends on the acquired company's profitability and cash flow relative to the cost of debt.
Acquisition of a controlling INTEREST in a company in a transaction financed by the issuance of DEBT instruments by the acquired entity.
takeover financed to a large degree by debt that is secured, serviced and repaid through the cash flow and assets of the acquired company. Typically, an LBO is financed predominantly by bank debt and low quality bonds, and to a minimum degree by equity. Its extreme leverage makes an LBO dependent upon a stable economy and stable interest rates, as well as a stable cash flow from the acquired company for its success.