A Leveraged Buyout (LBO) is the purchase of a company where a significant portion — often 50–75% — of the acquisition price is financed through debt. The target company's assets and anticipated cash flows serve as collateral for the borrowing. Private equity sponsors contribute the equity portion and work to improve the company's operations, financial profile, and strategic positioning before exiting at a higher multiple.
LBOs generate returns through a combination of operational improvement, debt paydown (which increases equity value), and multiple expansion (buying at a lower valuation multiple than the exit multiple). In Australia, large LBOs have included iconic transactions such as the privatisation of national infrastructure and retail businesses. Southeast Asian LBO activity has historically been constrained by thinner debt markets but has grown as regional banking and private credit markets develop.