leveraged-buyout-structure

Vocabulary Word

Definition

'Leveraged buyout structure' refers to a financial method where you buy a company using borrowed money, usually from bonds or loans. A key feature is that the company you're buying is expected to pay back the loan.

Examples in Different Contexts

For private equity, the 'leveraged buyout structure' details how a private equity firm plans to finance the acquisition of a company. A private equity manager might say, 'Our buyout structure minimizes equity investment and maximizes debt to leverage our capital.'

Practice Scenarios

Investment

Scenario:

The risk associated with a highly leveraged deal can be higher, but the potential for returns is also magnified given the right conditions.

Response:

True, the risk is high in a leveraged buyout structure, but the potential for substantial returns make it worth considering.

Accounting

Scenario:

We need to understand the implications of these financial methods in our books. Let's look at some scenarios for an acquisition.

Response:

Yes, we should understand the financial effect of a leveraged buyout structure before going ahead with the acquisition.