Also known as a buyout. An acquisition strategy used by private equity firms involving a significant amount of borrowed money to fund the purchase price. The target company's assets generally serve as security for the loans which are later paid back from the target company's cash flow. Acquirors often favor an LBO when they do not want to make a large capital investment in the acquisition. Leveraging an investment also allows private equity firms to realize better rates of return on invested equity capital. For more on LBOs, see Practice Note, Buyouts: Overview.