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Leveraged buyout

What is an LBO (leveraged buyout)?  Explain the risks and the potential rewards for the equity investors.

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A leveraged buyout is defined as a purchase of a publicly owned corporation by a small group of investors by means of a huge amount of borrowed money. The risks for the equity investors are mainly those that will occur whenever a high degree of financial leverage will be present. So are the rewards, in this case small returns turn out to be large returns because of leverage.

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