Leveraged buyout

Leveraged buyout (also known by its acronym, LBO) is a transaction in which a firm's publicly owned stock is acquired in a mostly debt-financed tender offer, resulting in a privately owned, highly leveraged firm. Often, the firm's own management initiates the LBO.

Definitions

According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),

Leveraged buyout (LBO). A transaction in which a firm's publicly owned stock is acquired in a mostly debt-financed tender offer, resulting in a privately owned, highly leveraged firm. Often, the firm's own management initiates the LBO.

According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),

Leveraged buyout (LBO). A situation in which a small group of investors (which usually includes the firm's managers) borrows heavily to buy all the shares of a company.

Related concepts

• Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.

Related lectures

• Introduction to Financial Management.