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A buyout refers to a situation where the existing owners of a firm are "bought out" by another group, usually management and/or workers of that firm. A buyout may be for the whole firm or a division or a plant as the case applies.

The financing of the buyout can be structured in various ways such as bank loans or through the issuance of bonds. In a leveraged buyout for example, a fairly large proportion of debt in relation to the asset value of the firm is incurred. Because buyouts lead to replacing publicly traded equity with debt (in the form of bonds backed by assets and other guarantees) the firms are often viewed as "going private" since its shares may no longer be listed on the stock exchange. Buyouts are viewed as an integral part of the market for corporate control and the re- deployment of assets from lower to higher valued uses.

Source Publication:
Glossary of Industrial Organisation Economics and Competition Law, compiled by R. S. Khemani and D. M. Shapiro, commissioned by the Directorate for Financial, Fiscal and Enterprise Affairs, OECD, 1993.


Statistical Theme: Financial statistics

Created on Thursday, January 3, 2002

Last updated on Friday, March 15, 2002