A leveraged buyout is one company's acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company.

What happens in a LBO?

A leveraged buyout (LBO) occurs when someone purchases a company using almost entirely debt. The purchaser secures that debt with the assets of the company they're acquiring and it (the company being acquired) assumes that debt. The purchaser puts up a very small amount of equity as part of their purchase.

What does LBO stand for on Wall Street?

LBO is the short form for Leverage buyout which means that the other company is acquired by borrowing large amount of money to meet the acquisition cost and the purpose of these buyouts is primarily make larger acquisitions without blocking a huge capital and providing assets of the acquiring and the acquired company ...