Leveraged buyout

A leveraged buyout is where an investor group acquires a business using mainly borrowed money.

A leveraged buyout is where an investor group acquires a business using mainly borrowed money.

The amount of equity finance used in these deals is usually very small and 80% or more the finance for the deal takes the form of debt. Much of this debt is likely to take the form of 'junk bonds', which carry a high rate of interest, reflecting the risks of carrying such a high level of debt. This means there is a strong incentive for the investors to pay down the debt as quickly as possible.

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