LBO and acquisition finance · United Kingdom
Leveraged buyout finance, structured from the lender's side of the table.
We arrange the debt behind UK buyouts and acquisitions: senior, unitranche, mezzanine, cash flow and asset based, across 40+ banks, debt funds and asset based lenders, for sponsors, management teams and companies buying companies. Built by a former Bank of Scotland and Lloyds banker who wrote the credit papers for 25 years.
| Senior debt 2.5x | £5,000,000 |
| Mezzanine 1x, PIK | £2,000,000 |
| Equity sponsor and management | £5,480,000 |
| Enterprise value plus fees | £12,480,000 |
Computed from the inputs shown, indicative as of September 2026. Change the assumptions.
Advice from Matt Lenzie · 25-year career banker (Bank of Scotland, Lloyds Banking Group). £400m+ raised for clients.
Founder profile →The definition
What is leveraged buyout finance?
A leveraged buyout is the acquisition of a company funded mainly with borrowed money secured on the company itself, and leveraged buyout finance is the debt that makes it possible. The lenders advance a multiple of the target's EBITDA, the buyer contributes the equity, the debt is secured on the target's shares and assets, and the target's own cash flow repays it over the following years. The buyer may be a private equity sponsor, an acquisitive trading company or, as in most UK deals below £20 million, the management team itself. Whoever leads, the structure is the same: earnings borrowed against today to buy the business that generates them.
Leveraged buyouts (LBOs) come in several types. A sponsor-led LBO is the classic private equity deal. A management buyout is an LBO led by the incumbent team. A secondary buyout is the sale of a sponsor-owned business to another sponsor, refinanced with a fresh debt package. A public-to-private takes a listed company off the market with debt. And a corporate carve-out buys a division out of a larger group. The mechanics are shared: an LBO model that projects cash flows, a debt stack that ranks senior debt above subordinated debt and loan notes, and an exit strategy that returns the equity, usually a sale, a secondary buyout or a refinancing three to seven years later. Market conditions move the leverage available in the United Kingdom from year to year, but the risks are constant: too much debt against too little sustainable cash flow.
For the mechanics from offer to exit read how a leveraged buyout works; for the definition in depth, what a leveraged buyout is. Companies buying companies start at acquisition finance.
The capital structure
How is a leveraged buyout funded, layer by layer?
In ranked layers, each priced for its position in the queue if things go wrong. Senior debt sits first, subordinated debt such as mezzanine and shareholder loan notes behind it, ordinary equity last. Indicative bands as of September 2026, all-in and before arrangement fees; most UK leveraged buyouts below £50 million of enterprise value use two or three of these layers, not all six.
| Layer | Rank | Typical size | Indicative cost | Provided by |
|---|---|---|---|---|
| Senior debt | First | 2.5x to 3.5x EBITDA | 7% to 10% all-in | Banks |
| Unitranche | First (single tranche) | 4.0x to 5.5x EBITDA | 10% to 13% all-in | Debt funds |
| Cash flow lending | First or second | 2.0x to 3.5x EBITDA | 9% to 14% all-in | Specialist lenders |
| Asset based lending | First over specific assets | Borrowing base | 6% to 10% plus facility fees | ABL houses |
| Mezzanine | Second | 1.0x to 1.5x EBITDA | 12% to 18% including PIK | Mezzanine funds |
| Shareholder loan notes and equity | Last | 30% to 50% of enterprise value from sponsor and management | Equity return, 20%+ IRR target | Sponsors, management |
Each layer has its own page: senior debt, unitranche, mezzanine, cash flow lending. The full structure is in our guide to the leveraged buyout capital structure.
Worked example
What does a UK mid-market LBO look like in numbers?
A business with £2,000,000 of EBITDA bought at 6x, funded with 2.5x of senior debt and 1x of mezzanine, held for 5 years with EBITDA growing 5% a year and sold at the entry multiple. Illustrative only; computed live from those inputs.
Most of the return comes from debt paid down and EBITDA grown, not from a higher exit multiple, which is how a disciplined buyer underwrites. Free cash flow is EBITDA less tax and 5% maintenance capex; senior debt amortises with a 50% cash sweep; mezzanine PIK accrues to exit. Indicative as of September 2026.
Leverage
How much will UK lenders lend against EBITDA?
Less than the headlines suggest, and it depends on who is asking. Banks are comfortable at 2.5x to 3.5x EBITDA of senior debt on a business with steady cash conversion, amortising over five or six years. Unitranche funds will write 4.0x to 5.5x in a single facility with a bullet repayment, for a higher coupon. Adding a mezzanine layer takes a bank structure to 3.5x to 5.0x EBITDA with unitranche or mezzanine. Beneath the multiples sit the tests that actually bind: net debt to EBITDA covenants with headroom to the forecast, interest cover of 3.0x or better, and debt service cover of 1.25x to 1.5x on free cash flow after tax and capex.
Test your ratios · Debt to EBITDA and the other ratios explained · Leveraged finance
Funder panel
Who provides leveraged and acquisition finance in the UK?
Six groups with six different appetites. Banks such as Barclays, HSBC UK, Lloyds Bank, NatWest, Santander UK write senior term debt and revolving facilities priced off Bank Rate or SONIA. Debt funds including Ares Management, Barings, Pemberton, Tikehau Capital provide unitranche to sponsor-backed mid-market companies. Specialist cash flow lenders such as ThinCats, Caple, Growth Lending lend against EBITDA below the size debt funds will consider. Asset based lenders including Close Brothers, Aldermore, Arbuthnot Commercial ABL fund against the balance sheet. Mezzanine funds sit between debt and equity, and private equity houses such as BGF, LDC, Inflexion provide the equity beneath it all. Names are illustrative of the market, not a recommendation, and we are not a lender.
How each group underwrites a leveraged deal · Private equity buyout finance
Who leads
Sponsor-backed, sponsor-less or corporate acquirer?
Lenders price the leader as much as the business, and the three types of buyer produce three different leveraged buyouts. A private equity sponsor brings equity, governance and a track record, and unlocks the debt funds and higher leverage. A sponsor-less management team buying its own business gets bank senior debt and cash flow lending at lower multiples, usually with a vendor loan note filling the gap, and keeps all the equity. A trading company buying a competitor is assessed on the combined group and can often borrow against its existing balance sheet as well as the target's. We work with all three, and the first job on any deal is deciding which structure the cash flow genuinely supports. Businesses that have already been through one buyout, and are now the subject of a secondary buyout or a refinancing, are assessed on the same basis with the added evidence of how the first debt package performed.
Management-led deals in depth: MBOFinance.co.uk · Companies buying companies: business acquisition loans · LBO vs MBO
Finance routes
Which instrument does your deal need?
Eight routes, one desk. From a bank acquisition loan for a first bolt-on to a unitranche and mezzanine stack behind a sponsor, every case runs across the same 40+ banks, debt funds and asset based lenders. Acquisitions, buyouts and refinancings each draw on a different mix of these instruments, and the pages below explain how each one works, what it costs and who provides it in the UK.
Acquisition finance
The head product: debt to buy a business.
Business acquisition loans
Term loans to buy a company.
Leveraged finance
Debt sized on cash flow, not assets.
Cash flow lending
Borrowing against earnings.
Senior debt
First-ranking, lowest cost.
Unitranche debt
Senior and junior in one facility.
Mezzanine finance
Between senior debt and equity.
Private equity buyout finance
Debt alongside a sponsor.
How we work
How do we take a leveraged deal from first call to completion?
- Step 1
Brief 15-minute call
We take the deal outline: the target, its EBITDA and cash conversion, the price, who the acquirer is and how much equity is available. Fee-free; no commitment.
- Step 2
Debt capacity and indicative terms
We size senior, unitranche or mezzanine debt against EBITDA and free cash flow, build the sources and uses, then run the case across banks, debt funds and asset based lenders for indicative terms.
- Step 3
Credit approval and due diligence
The chosen funders take the case to credit. Financial, commercial and legal due diligence, covenant setting, security and any guarantee terms are agreed and the offer is issued.
- Step 4
Legals and completion
Facility agreement, intercreditor deed, debenture and share purchase agreement are negotiated in parallel. Funds draw on completion.
Book the 15-minute call → · Every acquisition funding route compared
Questions
Leveraged buyout questions, answered
What is a leveraged buyout?+
A leveraged buyout is the acquisition of a company funded mainly with borrowed money that is secured on the company being bought and repaid from its cash flows. The buyer, a private equity sponsor, a management team or an acquisitive group, contributes equity for the balance. The leverage magnifies the return on that equity if the business performs, and magnifies the loss if it does not.
How does a leveraged buyout work?+
A new company is formed to buy the target. Lenders advance senior debt, and sometimes unitranche or mezzanine, sized as a multiple of the target's EBITDA. The buyer puts in the equity. On completion the debt is secured on the target, and over the following years the target's free cash flow after tax and capex repays it. At exit the business is sold or refinanced, the remaining debt is cleared and the equity holders keep what is left.
Why is a leveraged buyout bad?+
It is not inherently bad, but it is unforgiving. High leverage means a modest fall in earnings can breach covenants or leave the business unable to service its debt, and the pressure to pay lenders can starve investment. The UK has well-known examples of over-leveraged buyouts that failed, particularly in retail. The counter-argument is that leverage imposes discipline, aligns management with owners and lets teams buy businesses they could never afford with equity alone. The difference is almost always how much debt was used relative to genuinely sustainable cash flow.
What is the biggest LBO ever?+
By widely reported value, the 2007 buyout of the Texas utility TXU (later Energy Future Holdings) by KKR, TPG and Goldman Sachs Capital Partners at about $45 billion including debt, which later filed for bankruptcy. In the UK, KKR's 2007 take-private of Alliance Boots at around £11 billion was the first leveraged buyout of a FTSE 100 company, and Clayton, Dubilier and Rice's 2021 acquisition of Morrisons at roughly £7 billion of equity value was among the largest since.
How much debt does a UK leveraged buyout use?+
As of September 2026, banks typically provide senior debt of 2.5x to 3.5x EBITDA, unitranche funds 4.0x to 5.5x in a single tranche, and total debt on sponsor-backed deals lands at 3.5x to 5.0x EBITDA with unitranche or mezzanine. Equity usually funds 30% to 50% of enterprise value from sponsor and management. Smaller, sponsor-less deals carry less debt and more equity.
What is the difference between an LBO and an MBO, and what is a secondary buyout?+
Who leads it and how much debt is used. A management buyout is led by the team that runs the business; a leveraged buyout is defined by its funding, a high proportion of debt, and is usually led by a financial sponsor. Most UK MBOs are leveraged, and most LBOs keep or install a management team, so the categories overlap heavily. A secondary buyout is a leveraged buyout of a business that is already owned by a private equity sponsor, sold on to another sponsor with a new debt package. Our sister site MBOFinance.co.uk covers management buyouts in depth.
Can a company get a loan to buy another business?+
Yes. Acquisition finance for a trading company buying a competitor or a bolt-on is a large part of the UK bank market. Lenders assess the combined group's EBITDA and cash flow, typically lend 2.5x to 3.5x, take a debenture over the acquirer and the target, and look for the buyer to fund 30 percent or more of the price from equity or a vendor loan.
Enquiry
Get the debt structured for your deal
Same-business-day callback, in confidence. Whole-of-market access to 40+ banks, debt funds and asset based lenders. Initial consultation fee-free.
- Whole-of-market: banks, unitranche and mezzanine funds, cash flow lenders, asset based lenders and private equity.
- A funding structure and indicative terms before you commit to anything.
- Initial consultation always fee-free. Confidential.