What is a Leveraged Buyout?

Dustin Hasan
Sep 6, 2018 · 1 min read

What is a Leveraged Buyout?

A leveraged buyout is a financial transaction in which a company is purchased with a combination of equity and debt, in which the company’s cash flow and/or assets is used as collateral to secure and repay the borrowed money. The debt portion is usually around 60–70% while the remaining equity portion is usually 30–40% typically funded by a financial sponsor. With a traditional holding period of 5–7 years and an exit by a strategic buyer, another financial sponsor, or IPO.

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