Private equity (PE) financing is money invested by PE firms in privately owned businesses. PE financing is often used to buy out some or all of the ownership interests of the owners of a business (target company). PE firms often use debt to finance these buyout transactions—with the target company taking on significant loans to secure the money (capital) to buy out the current owners of the business. The target company must, of course, pay back these loans from its lenders, with interest. Because of this use of debt financing, these buyouts have traditionally been called leveraged buyouts (LBOs).

In Alabama, private equity (PE) financing operates under the same general principles as it does throughout the United States. PE firms invest in privately held companies, often with the goal of acquiring a significant stake or complete ownership. These transactions frequently involve leveraged buyouts (LBOs), where the acquisition is financed through a substantial amount of debt that the target company takes on. The target company is then responsible for repaying this debt, along with any accrued interest. The regulatory framework for such transactions includes both federal securities laws and state statutes. Federal laws, such as the Securities Act of 1933 and the Securities Exchange Act of 1934, govern the disclosure and reporting requirements for these transactions, while state laws may address matters such as corporate governance, mergers, and acquisitions. It is important for companies engaging in PE financing to comply with these regulations and to consult with an attorney to navigate the complexities of the transaction.