A leveraged buyout (LBO) is an acquisition strategy whereby a company is purchased by another company (typically an investment firm) using borrowed money (bonds or loan). LBOs played an important role in the restructuring of corporate America in the 1980s.

In numerous cases, LBOs have been used by managers to buy out shareholders (a process then called management buyout) in order to gain control over the company (both ownership and decision making), which raises ethical problems of conflicts of interest.

Of the many firms associated with LBOs (e.g., the Carlyle Group, the Blackstone Group, Forstmann Little & Company, Hicks, Muse, Tate & Furst), the New York City–based private equity firm Kohlberg Kravis Roberts & Co. (KKR) is the most well-known for two reasons: First, KKR pioneered the ...