Buyout investments are control-investments in more mature or later-stage companies. There are two kinds of buy-outs; leveraged buyouts (LBOs) and management buyouts (MBOs).

A leveraged buyout occurs when an investor acquires a controlling stake in a company’s equity, and where a significant percentage of the purchase price is financed through leverage (borrowing). The assets of the acquired company are used as collateral for the borrowed capital.

Companies of all sizes and industries have been the target of leveraged buyout transactions, although because of the importance of debt and the ability of the acquired firm to make regular loan payments after the completion of a leveraged buyout, some features of potential target firms make for more attractive leverage buyout candidates, including:

·         Low existing debt loads

·         A multi-year history of stable and recurring cash flows

·         Hard assets (property, plants, equipment etc) that may be used as collateral

·         The potential for new management to make operational or other improvements to the firm to boost cash flows

·         Market conditions and perceptions that depress the valuation or stock price

A management buyout is a form of acqusition where a company's existing managers acquire a large part or all of the company.