Eli5:How is taking a company private through a lbo different from the company buying back its shares? PS: I’m just a beginner in the finance field, just wanna know the difference!

Question

Eli5:How is taking a company private through a lbo different from the company buying back its shares? PS: I’m just a beginner in the finance field, just wanna know the difference!

In: Economics

Answer 1

And LBO is a means of financing the buying back all the shares. It means that whoever it taking the company private is taking on debt (ie. borrowing money) to fund the share purchase. And LBO is typically initiated by an outside investor like a hedge fund or private equity firm rather than the company itself.