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 Colorado, as in other states, private equity (PE) financing is a common method for funding the acquisition or expansion of privately held businesses. PE firms typically invest in companies with the intention of increasing their value over time before eventually selling the business at a profit. The use of debt in these transactions is a defining characteristic of leveraged buyouts (LBOs), where the acquired company assumes significant loans to finance the purchase of its own shares. The legal framework governing these transactions includes state corporate laws that dictate the duties and responsibilities of the directors and officers of the target company during a buyout, as well as federal securities laws that may apply to the transaction, particularly if any of the financing involves the issuance of securities. Additionally, the terms of the loans will be subject to state contract laws and, if the PE firm is managing investment funds, there may be additional regulatory considerations under both state and federal law, including regulations enforced by the Securities and Exchange Commission (SEC). It is important for companies involved in LBOs to ensure compliance with all relevant laws and regulations, and they often seek the advice of an attorney to navigate these complex transactions.