Jurisdiction(s):
United Kingdom

Key definition

Buy-out definition

What does Buy-out mean? In pensions practice, a buy-out is where the trustees of an occupational pension scheme secure members’ promised benefits by purchasing individual annuity policies from an authorised life insurer, in the name of each member or other beneficiary. The insurer then becomes responsible for paying the benefits, and the scheme’s (and employer’s) liabilities to those individuals are discharged. Buy-out is a descriptive term rather than one defined in legislation, but the discharge of trustee liabilities, the order of priority on winding up and member protection requirements are set by pensions legislation and regulatory guidance. Usage and effect are broadly consistent...

Leveraged Buy-Outs: Equity, Senior Debt, Unitranche, Second Lien, Mezzanine, PIK and Notes - Structures and Key Considerations

Published by a LexisNexis Banking & Finance expert

Practice notes

In most leveraged buy-outs, funding combines Equity and debt. Deployment of proceeds varies by deal, but finance is typically directed to:

buying the target business—usually by making a direct payment to the seller
meeting transaction Costs and expenses, including advisers’ Fees, and
refinancing outstanding debt

A transaction may instead aim to refinance existing liabilities or return capital to the sponsor without a full exit—known as a ‘leveraged recapitalisation’—rather than acquire a target (see Practice Note: What is acquisition finance?).

This Practice Note considers:

how investors inject equity into the group and the forms that equity may take
the range of debt options, including senior facilities, mezzanine facilities, second lien facilities, PIK or payment in kind facilities, unitranche facilities, senior secured notes and subordinated notes, and
the factors that influence the choice of funding structure

For an introductory overview, see Practice Note: Introductory guide to acquisition finance. For a glossary of key terms and jargon, see the Glossary of acquisition finance terms and jargon.

Equity Provision...

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Web page updated on 21/05/2026

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