LBO Definition & Meaning

A Leveraged BuyOut is when a company (typically an investment firm) purchases another company using significant amounts of borrowed money (leverage) to pay for the company. The assets & cash of the purchased company are used as collateral for the loans. Additionally, many of these investment firms will use revenue from the company they bought to pay down the debt.

Examples

1. When Blackstone bought Hilton Hotel, it was an LBO, where Blackstone leveraged $20.5bn in loans and fronted $5.6bn itself
2. The Koch brothers took over Georgia Pacific in 2005 using a LBO format

This term typically relates to investing & finances