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leveraged buyout (LBO): is a transaction when a company or single asset (exe : a real estate property) is purchased with a combination of equity and significant amounts of borrowed money, structured in such a way that the target's cash flows or assets are used as the collateral (or "leverage") to secure and repay the borrowed money.
An LBO is when a company wants to acquire another company and does so by way of raising debt to obtain capital, be it by loan, bonds, or other kind of debenture.
LBO is used when acquisition is made out of higher ratio of borrowed money than capital. The lien is placed on the assets of the company being acquired. Debt - equity ratio is high hence the name leveraged buy out.
