What does LBO mean?

Definitions for LBO
lbo

This dictionary definitions page includes all the possible meanings, example usage and translations of the word LBO.


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Wikipedia

  1. lbo

    A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money (leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company. The use of debt, which normally has a lower cost of capital than equity, serves to reduce the overall cost of financing the acquisition. The cost of debt is lower because interest payments often reduce corporate income tax liability, whereas dividend payments normally do not. This reduced cost of financing allows greater gains to accrue to the equity, and, as a result, the debt serves as a lever to increase the returns to the equity.The term LBO is usually employed when a financial sponsor acquires a company. However, many corporate transactions are partially funded by bank debt, thus effectively also representing an LBO. LBOs can have many different forms such as management buyout (MBO), management buy-in (MBI), secondary buyout and tertiary buyout, among others, and can occur in growth situations, restructuring situations, and insolvencies. LBOs mostly occur in private companies, but can also be employed with public companies (in a so-called PtP transaction – public-to-private). As financial sponsors increase their returns by employing a very high leverage (i.e., a high ratio of debt to equity), they have an incentive to employ as much debt as possible to finance an acquisition. This has, in many cases, led to situations in which companies were "over-leveraged", meaning that they did not generate sufficient cash flows to service their debt, which in turn led to insolvency or to debt-to-equity swaps in which the equity owners lose control over the business to the lenders.

Suggested Resources

  1. LBO

    What does LBO stand for? -- Explore the various meanings for the LBO acronym on the Abbreviations.com website.

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Numerology

  1. Chaldean Numerology

    The numerical value of LBO in Chaldean Numerology is: 3

  2. Pythagorean Numerology

    The numerical value of LBO in Pythagorean Numerology is: 2

Examples of LBO in a Sentence

  1. Alex Diaz-Matos:

    After the LBO wave of 2006/07, investors started to pay close attention to CoC, we expect more IG bonds to include them as market conditions change.

  2. John Fraser:

    There’s been little in the way of traditional LBO (leveraged buyout) activity, and what little there has been in the way of new money new issuance has been corporate to corporate activity, m&A activity is approaching record levels, exceeding the 2007 pace, so there are lots of deals happening but unfortunately they are at price points where most of the private equity sponsor community really can’t compete.

  3. John Sherman:

    Given the illiquidity and volatility, we'd anticipate that LBO volumes in particular would probably be lower than in an otherwise functioning market.

Popularity rank by frequency of use

LBO#10000#37721#100000

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"LBO." Definitions.net. STANDS4 LLC, 2024. Web. 19 Mar. 2024. <https://www.definitions.net/definition/LBO>.

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