LBO
Definition
Leveraged buyout — acquiring a company using a large amount of borrowed money, then using the target’s own cash flows to pay down that debt and amplify equity returns.
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Let's Talk Growth Equity
Growth equity sits between venture capital and private equity, backing proven companies that are still growing quickly. These articles cover how growth investors evaluate businesses, how the work and return profile differ from VC and buyouts, and where the strategy fits in a finance career.
Fast facts
Growth Equity at a glance
20–40%Typical stakeMinority positions that leave founders in operational control.
2–4xTarget return multipleDriven by revenue and earnings growth rather than leverage.
3–7 yearsHolding periodCapital scales an already-proven model before the fund exits.
Little debtHow deals are fundedUnlike buyouts, growth deals use little or no borrowing.
Cold outreachThe junior grindAnalysts source deals by emailing and calling founders directly.
VC ↔ PEWhere it sitsBetween venture capital and buyouts, as both a strategy and a career.
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Frequently Asked Questions
Private equity firms raise money from investors, buy companies (often using debt), improve them over three to seven years, and sell them for a profit. The returns are split between the fund’s investors and the firm.
The traditional path is two years as an investment banking analyst, then recruiting during the on-cycle process for a PE associate role. A growing number of firms also hire undergraduates directly and run off-cycle processes throughout the year.
A leveraged buyout funds an acquisition largely with borrowed money. Because the firm invests relatively little of its own equity, paying down debt with the company’s cash flow can produce outsized returns — which is why LBO modeling is the core PE technical skill.
PE associates at large firms typically earn total cash compensation in the $250K–$400K range, and senior professionals also receive carried interest, which is where the real wealth in the industry is created.
PE generally offers more investing responsibility, better hours than banking (though still demanding), and higher long-term upside through carry. But it is harder to get into, and banking is almost always the stepping stone that gets you there.
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