A leveraged buyout (LBO) model is a financial framework used to evaluate the acquisition of a company using a significant amount of borrowed funds. In this model, the buyer typically uses a combination of equity and debt to finance the purchase, with the expectation that the acquired company's cash flows will cover the debt repayments. This approach allows investors to amplify their returns on equity by using leverage. LBO models often include projections of the target company's future performance, including revenue growth and cost management. Key components of the model include the purchase price, financing structure, and exit strategy, which outlines how the investors plan to sell the company for a profit, often through initial public offerings (IPOs) or secondary sales.