In corporate acquisitions, what term describes a deal financed largely with borrowed money?

In corporate acquisitions, a leveraged buyout is a deal financed largely with borrowed money.

The acquiring investors use debt, often alongside some equity, to purchase a company or a controlling interest in it. The acquired company’s assets and expected cash flows may help support the borrowing, although the exact structure varies by transaction and legal jurisdiction.

Leveraged buyouts became especially prominent in the United States during the 1980s. Private-equity firms remain important participants, but management teams, public companies, and other investors can also conduct leveraged buyouts. A transaction may take a public company private, divide a business, or transfer ownership of a private company.

Debt can magnify returns if the company performs well, but it also increases interest costs and financial risk. The term is sometimes confused with a management buyout, which describes who buys the business; an MBO can be structured as a leveraged buyout, but the terms are not identical.