Leveraged buyout

A leveraged buyout is the acquisition of a company using a large amount of borrowed money, with the target company's own assets and future cash flows typically used as collateral for the debt. It is a technique closely associated with private equity firms.

Because so much of the purchase is debt-funded, the buyer only needs to put up a relatively small amount of its own capital to control the whole company. The strategy works well when the acquired company generates enough cash flow to pay down the debt over time, but it also means the company inherits a much heavier debt load than it had before the deal.