What is a Leveraged Buyout

A leveraged buyout uses debt to purchase assets.  The acquiring firm will use the purchased company's internal cash flows to pay down the debt and build equity in the company.  Leveraged buyouts provide a current market view of the range of hypothetical purchase prices by a potential third party acquirer.  Generally, private equity firms will want to generate a return of at least 25% to 30% for the deal to be worth their time.