Leveraged Buyout Investor

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A leveraged buyout (LBO) is when investors buy a company with a small amount of equity and a significant amount of debt. As investors and other financial sponsors increase their returns by employing a very high leverage (i.e., a high ratio of debt to equity), they have an incentive to employ as much debt as possible to finance an acquisition. Because of the complex and potentially high-risk nature of LBOs, Leveraged Buyout Investors need to be keenly aware of both industry-specific and macro trends.

The first leveraged buyouts may have been the purchases of the Pan-Atlantic Steamship Company and Waterman Steamshipping Corporation by Malcom McLean's eponymous McLean Industries back in 1955.

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