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 Massachusetts, private equity (PE) financing is a common practice where PE firms invest in privately held companies, often to acquire ownership stakes. These transactions frequently involve leveraged buyouts (LBOs), where the acquisition is financed through a significant amount of debt that the target company assumes. The target company is then responsible for repaying this debt, along with any accrued interest. While there is no specific Massachusetts statute that exclusively governs PE financing or LBOs, these transactions are subject to a variety of state laws and regulations, including corporate governance, securities, and creditor protection laws. Additionally, federal laws, such as securities regulations enforced by the Securities and Exchange Commission (SEC) and tax implications under the Internal Revenue Code, also apply. It is important for companies engaging in PE financing to ensure compliance with all relevant laws and to consider the implications of taking on substantial debt. Companies considering such transactions often consult with attorneys who specialize in corporate finance and securities law to navigate the complex legal landscape.