leveraged-acquisition-financing

Vocabulary Word

Definition

In leveraged acquisition financing, a group or person uses borrowed money, or 'leverage', to pay for the cost of acquiring a company. The goal is to pay the loan back later by using the profits from the company.

Examples in Different Contexts

In corporate finance, 'leveraged acquisition financing' refers to using borrowed funds to acquire another company. A financial analyst might explain, 'The firm is considering leveraged acquisition financing to undertake a major takeover without depleting its reserves.'

Practice Scenarios

Business

Scenario:

The target company is significantly undervalued, showing strong cash flows in a growing market. This could make a compelling buyout opportunity.

Response:

Absolutely, we should explore the possibility of a buyout using leveraged acquisition financing.

Startup

Scenario:

There’s a tech startup for sale with a promising product. The asking price is high, but the potential ROI could be substantial.

Response:

Despite our current budget constraints, using leveraged acquisition financing could allow us to consider this investment.