VC 3

• It is the purchase of a company using a

large amount of debt or borrowed cash

to fund the acquisition.

It occurs when an investor, typically a

financial sponsor acquires a controlling

interest in a company’s percentage of

the purchase price is financed through

leverage

It is also considered as highly leveraged

transaction.

downpayment

mortgage is called .

In LBO, the acquisition of another

company is significantly by borrowed

money like

• It occurs when the existing management

team of a company acquires all or a

significant part of the company from the

private owner or the parent company.

the management itself will take over

the company.

It’s attractive to managers since they can

expect greater potential rewards buy

being the owners of the business instead

of employees.

Dual Nature of LBO