Leveraged buyouts, whereby purchasers use significant debt to fund transactions, are growing in size and influence. Colin Blaydon and Fred Wainwright explore the rise of private equity

he leveraged buyout (LBO) model has evolved into a powerful mechanism for corporate transformation. Multibillion-dollar buyout funds are busy purchasing private companies and taking public companies private. Nine of the top ten largest buyouts in history have been completed in the past 18 months by private equity houses, and with these record amounts of capital, both in terms of debt and equity, available, megadeals are almost commonplace. This article will survey the basics of buyout transactions, discuss how value is created and describe current industry issues. Recent developments include club deals, technology buyouts, the high levels of credit currently available and the institutionalisation of the industry.