This refers to a financial
transaction wherein a
company is acquired by
another, predominantly
through the use of debt.
Leveraged buyouts, by allowing
companies that
lack sufficient investment
capital to use borrowed
capital to acquire other
large businesses, are said
to facilitate large financial
transactions.
Many leveraged
buyouts, however,
fail eventually when the
cash earnings from the acquired
business fail to justify
the debt payments incurred
over a number of
consecutive years.
Since
the lender is subject to
substantial financial risk, it
is not unusual to see the
acquired business being
pledged as collateral that
the lender can seize in
case of a default.
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