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 Rhode Island, as in other states, private equity (PE) financing is a common method for funding the acquisition or expansion of privately held companies. PE firms provide capital in exchange for equity in the target company, and these transactions often involve leveraged buyouts (LBOs), where the acquisition is largely funded through debt. The target company is responsible for the repayment of this debt, along with any associated interest. The regulatory framework for such transactions includes both state statutes and federal securities laws. State laws in Rhode Island would govern the corporate governance aspects of the transaction, including the duties of directors and officers during a buyout. Federal laws, particularly those enforced by the Securities and Exchange Commission (SEC), would oversee the disclosure requirements, anti-fraud provisions, and other aspects of the transaction to protect investors and the integrity of the financial markets. It is important for companies engaging in PE financing to comply with all applicable laws and regulations, and they often consult with attorneys to navigate the complex legal landscape.