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 Tennessee, private equity (PE) financing operates under the same general regulatory framework that governs such transactions across the United States. PE firms invest in privately held companies, often to acquire a significant stake or complete ownership. These transactions frequently involve leveraged buyouts (LBOs), where the acquisition is heavily financed through debt that the target company is responsible for repaying. The regulatory environment includes federal securities laws, such as the Securities Act of 1933 and the Securities Exchange Act of 1934, which require disclosures and compliance with anti-fraud provisions. Additionally, the state of Tennessee has its own securities laws, known as 'blue sky laws,' which are designed to protect investors from fraudulent sales of securities. These laws require registration of securities and licensing of brokers and dealers. PE firms must also be mindful of the Tennessee Consumer Protection Act, which prohibits deceptive business practices, and they may be subject to regulations by the Tennessee Department of Financial Institutions, depending on the structure of the financing deal. It is important for PE firms to work with an attorney to ensure compliance with all applicable federal and state regulations when engaging in LBOs and other financing transactions.