# Leveraged Buyout (LBO)

*Corporate Finance & M&A — Finicade finance glossary*

An LBO buys a company mostly with borrowed money, secured against the target's own assets and repaid from its cash flow. Returns come from three sources: paying down debt, improving operations, and selling at a higher multiple than you paid. Leverage magnifies all three in both directions, which is why LBO targets are chosen for stable, predictable cash flow above growth.

**Also known as:** LBO, leveraged buyout

**Related terms:** [Private Equity](https://finicade.com/glossary/private-equity), [Sponsor](https://finicade.com/glossary/sponsor), [Term Loan B](https://finicade.com/glossary/term-loan-b), [Covenant](https://finicade.com/glossary/covenant), [Recapitalization](https://finicade.com/glossary/recapitalization), [Mezzanine Financing](https://finicade.com/glossary/mezzanine-financing)

Source: https://finicade.com/glossary/lbo