In finance, a buyout is an investment transaction by which the ownership equity of a company, or a majority share of the stock of the company is acquired. The acquiror thereby "buys out" the present equity holders of the target company. A buyout will often include the purchasing of the target company's outstanding debt, which is referred to as "assumed debt" by the purchaser.
The term may apply more generally to the purchase by one party of all of the rights of another party with respect to an ongoing transaction between the two. For example:
- An employer may "buy out" an employee's contract by making a single prepayment, so as to have no ongoing obligation to employ the person;
- A landlord may buy out the remainder of a tenant's lease, effectively paying them to vacate.
- A government may buy out homes in a floodplain or other area subject to hazard. The language used by FEMA, a United States agency, is "acquisition."
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Notes and references
- Evan Lehmann (May 7, 2013). "RISK: N.J. town, flood-soaked and weary, tries to back away from the water". ClimateWire E&E. Retrieved May 8, 2013.