Business and Personal Finance Dictionary

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• LEVERAGED BUYOUT
  
  Corporate acquisitions in which the acquiring company borrows most or all of the funds needed to finance the purchase. In a typical leveraged buyout, the buyer intends to repay the finance debt from funds gained from either the sale of assets owned by the acquired company or from profits earned by the acquired company. The high level of debt associated with almost all leveraged buyouts makes them relatively high-risk transactions. Thus, while some bank financing is often involved, some form of junior debt is needed. The junior debt in leveraged buyout may come from a lender willing to take a subordinate position. This type of financing is often called mezzanine financing. The funds needed for a leveraged buyout may also be raised by issuing junk bonds.
  
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