: The future cash flows of the acquired business are used to pay down the interest and principal of the debt over time.
: Often called "junk bonds," these are unsecured and carry higher interest rates due to increased risk. leveraged buyout
: The assets of the acquired company (and sometimes the acquirer) serve as collateral for the loans. : The future cash flows of the acquired
The "capital stack" in an LBO is often layered by risk and repayment priority: leveraged buyout
: The cash investment from the PE firm, usually 10%–40% of the deal. The LBO Lifecycle