Difference Between Leverage Buyout and Venture Capital

We are going to cover the main differences between leverage buyout and venture capital . It is very common in the world of financial markets to call leveraged buyouts by their English translation, leverage buyouts (LBO).

Both are very common operations in venture capital ( private equity in English). When compared between one and the other, it can be seen that there are great differences between both types of financing.

In the first place, these differences come from the target company, while in venture capital they look for companies in their early stages of development ( start-ups ), LBO operations look for companies in a much more mature process, where they seek to gain efficiency. and not so much a huge injection of capital as happens in start-ups.

A second differentiating factor is the type of financing used. It is usually linked to the type of target company. Since in mature markets there is high competition and the potential return ( TIR ) ​​is usually lower. The opposite occurs in recently created companies, where margins are high but at the cost of also assuming greater risk.