LBO

When a private equity firm does a "leverage buyout" or LBO, it uses a significant amount of debt. The list below is a high level explanation on the different types of debt instruments that are commonly used in LBO transactions.

When purchasing a company, the private equity fund will usually provide anything between 30-50% of the purchase price in equity (i.e. the fund own money), and borrow the rest. The 30-50% range varies depending on market conditions and the type of company that is bought, but usually most LBOs falls in that range.