[0x4e]

>Private equity relies on a basic technique known as the leveraged buyout, which works like this: you, a dealmaker, buy a company using just a small portion of your own money. You borrow the rest, and transfer all this debt on to the company you just bought. In effect, the company goes into debt in order to pay for itself. If it all goes well, you sell the company for a profit and you reap the rewards. If not, it is the company, not you, that is on the hook for this debt.

——

Not how I've seen this work. These often require a personal guarantee, in some cases the homes of whoever is applying for the loan. So, whoever wrote this article has no idea of the real acquisition process.

[nradov]

What you're describing is accurate when an individual or partnership buys a small business. Regular bank loans usually require additional security guarantees beyond just the business assets. But large PE firms have access to other sources of financing beyond traditional loans.

[watwut]

Leverage buyout is what private equities do and works exactly as described. It usually destroys the company.