This term has different meanings depending on the context in which it is used:
In the context of pensions, the securing of one or more members' benefits by purchasing an annuity ( www.practicallaw.com/1-107-6404) from an insurance company. It is the most expensive method of securing benefits and is used to determine the employer debt ( www.practicallaw.com/0-206-2072) under section 75 of the Pensions Act 1995 on the winding up of a pension scheme. See also buyout cost ( www.practicallaw.com/0-201-6481) .
In the context of the acquisition ( www.practicallaw.com/7-107-5821) of a target company or business, an acquisition of that company or business by a management team (either members of the existing team or one assembled for the buyout). It is financed by a combination of equity finance from a private equity ( www.practicallaw.com/3-107-7539) provider (financial sponsor) and debt finance from financial institutions and other investors. The acquisition is made by a newly formed special purpose vehicle ( www.practicallaw.com/4-107-7534) owned by the management team and the private equity provider or financial sponsor. These acquisitions, which use a high level of debt finance, are also frequently referred to as leveraged buyouts ( www.practicallaw.com/4-200-1393) (or LBOs).