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 Delaware, private equity (PE) financing is a common practice for investment in privately held companies. Delaware's corporate law framework is highly favorable for such transactions, which is why many PE firms and target companies are incorporated there. The state's statutes provide a flexible legal environment for structuring buyouts, including leveraged buyouts (LBOs), where the acquisition is largely funded through debt. The target company assumes this debt, which it is responsible for repaying with interest. Delaware law requires that these transactions comply with fiduciary duties and disclosure obligations, ensuring that the interests of shareholders and the company are protected. Additionally, federal securities laws and regulations, such as the Securities Act of 1933 and the Securities Exchange Act of 1934, may apply to PE transactions, especially when it comes to disclosure and reporting requirements, even though the companies involved are private. It is important for companies engaging in PE financing to consult with an attorney to navigate the complex legal landscape and ensure compliance with all applicable laws.