Leveraged Buyout May 2026

The "capital stack" in an LBO is often layered by risk and repayment priority:

The ultimate goal of an LBO is to realize high returns—often targeting an of 20% to 30%. Understanding the Leveraged Buyout Model - HBS Online leveraged buyout

: A hybrid of debt and equity that fills the gap between senior debt and equity. The "capital stack" in an LBO is often

: Often called "junk bonds," these are unsecured and carry higher interest rates due to increased risk. LBOs are defined by their unique capital structure

LBOs are defined by their unique capital structure and the use of the target company's own assets to facilitate the purchase.

: The future cash flows of the acquired business are used to pay down the interest and principal of the debt over time.

The Mechanics and Strategy of Leveraged Buyouts (LBOs) A is a specialized financial transaction in which a company is acquired using a significant amount of borrowed funds to meet the cost of acquisition. In a typical LBO, the debt-to-equity ratio is high, with borrowed capital often accounting for 60% to 90% of the purchase price. Core Structural Components