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What does LBO stand for? 

What does LBO mean? This page is about the various possible meanings of the acronym, abbreviation, shorthand or slang term: LBO.

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LBO

Leveraged Buy Out

Business » General Business -- and more...

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LBO

Line Build Out

Academic & Science » Electronics -- and more...

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LBO

Left Business Observer newsletter

Community » News & Media

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LBO

Large Business Office

Business » General Business

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LBO

Large Bowel Obstruction

Medical » Physiology

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LBO

Lusambo, Zaire

Regional » Airport Codes

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LBO

Let's Break Out

Governmental » Law & Legal -- and more...

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LBO

dBASE IV Compiled label Object code

Computing » File Extensions

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LBO

Laboratory of Biomechanical Orthopedics

Medical » Laboratory

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LBO

Landguard Bird Observatory

Medical » Veterinary

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LBO

Leveraged Buyout

Miscellaneous » Unclassified

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LBO

Line of Business Owner

Business

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LBO

Love Being Owners

Miscellaneous » Unclassified

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LBO

Long Baseline Observatory

Miscellaneous » Observatories

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LBO

Long Beach Opera

Miscellaneous » Unclassified

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LBO

Licensed Betting Office

Miscellaneous » Unclassified

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LBO

loose but OK

Miscellaneous » Unclassified

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LBO

Luxembourg Beach Open

Miscellaneous » Unclassified

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LBO

Legislative Budget Office

Governmental » Legislation

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LBO

Last Best Offer

Business » Products

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LBO

Last Ball Over

Miscellaneous » Unclassified

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LBO

Large Bowel Obstructions

Miscellaneous » Unclassified

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LBO

Lanka Business Online

Business

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LBO

Compiled Label

Computing » IT

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LBO

Lying By Omission

Internet » Chat

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What does LBO mean?

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.

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