Learn something new today 📌 What is a Leveraged Buyout (LBO)? A Leveraged Buyout (LBO) is when a company is acquired using mostly borrowed money (debt), with the expectation that the acquired company’s cash flow will help repay the debt over time. The buyers invest a small portion of their own capital and use loans to finance the rest of the purchase, making it a high-risk, high-reward strategy. 📌 How It Works: 1️⃣ A private equity firm or investor identifies a company to buy. 2️⃣ They secure loans from banks or issue bonds to finance most of the purchase price. 3️⃣ The acquired company’s assets and future earnings act as collateral for the debt. 4️⃣ Over time, the debt is repaid using the company’s profits, cost-cutting measures, or asset sales. 5️⃣ Once the company is financially stronger, the investors sell it for a profit, often through a resale or IPO. 📌 Example: A private equity firm buys a retail chain worth $500 million, using $100 million of their own money and $400 million in loans. If the company grows and becomes worth $800 million, the investors make a huge return after repaying the debt.