#acquisitionfinance

Technical finance vocabulary tends to confuse and conflate terms that should be clearly understood. Acquisition financing and leveraged buyouts are two such terms. They both involve a financing transaction as well as an acquisition of something. They both involve large amounts of debt. The main difference between the terms has to do with the type of transaction, the initiator of the transaction and the underlying object being purchased. Leveraged buyouts are a structural approach used by private equity funds to acquire a controlling interest in a company. The goal of the leveraged buyout is to transfer control wherein the purchaser uses large amounts of debt to buyout the owner. Most leveraged buyouts are stock purchases, and the underlying object are the shares of the company. A leveraged buyout is the structural way that private equity firms acquire controlling interests in company. While it is theoretically an acquisition financing, it is rarely described as such.