A buyout is a financial transaction in which one company acquires another company, either by purchasing all of its outstanding shares of stock or by assuming control of its assets and liabilities. A buyout can be accomplished through a variety of means, including a cash purchase, a stock swap, or a combination of both.
There are different types of buyouts that can occur:
Leveraged buyout (LBO): is a type of buyout where a significant portion of the purchase price is financed through debt. The acquiring company uses the assets of the target company as collateral for the debt, which can make the buyout more risky, but also potentially more profitable.
Management buyout (MBO): is a type of buyout in which the management team of a company, often with the help of outside investors, acquires a controlling interest in the company from its current owners.
Secondary buyout: is a buyout in which a company that has already been taken private through an LBO or MBO is acquired by another company.
Buyouts can have various outcomes for the companies involved, including increased efficiency, improved market position, and increased profitability. However, they also come with risks, such as the potential for financial distress or the loss of key employees.