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LBO: Note Purchase Agreement


Leveraged buyouts utilize borrowed money to finance a deal. A leveraged buyout (LBO) occurs when an investor, typically a financial sponsor, acquires a controlling interest in a company's equity and where a significant percentage of the purchase price is financed through leverage (borrowing). The acquired company's assets are the collateral for the borrowed capital. LBOs usually use a combination of debt instruments, typically from banks and debt markets.

A note purchase agreement states the terms and conditions needed for buying a note. The agreement usually includes: the value of the note, delivery method, closing costs, and the names of the involved parties.