A Leveraged Buyout (LBO) is the acquisition of a company using a significant amount of borrowed money—typically debt—to finance the purchase, with the acquired company's assets often serving as collateral. Private equity firms commonly use LBOs to take over undervalued businesses, improve their operations, and later exit at a profit. For investors and market participants, LBO activity signals confidence in a target company's stable cash flow potential, as lenders require predictable earnings to service the acquisition debt.
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