LBO

What is a Leveraged Buy Out (LBO)?

A Leveraged Buy Out (LBO) is the acquisition of a company using borrowed money, usually via bonds or loans. The assets of the target company are offered up as Security by way of a mortgage debenture.

LBOs allow small companies to make large acquisitions, sometimes of companies larger than themselves (a good example being the acquisition of NatWest Bank by the much smaller Royal Bank of Scotland).

Unless carefully managed, an LBO can end in indigestion and/or failure.

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