• 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.

Source:TH