Free US Law Dictionary

Buyout

A buyout is an investment transaction by which an entire company or a controlling part of the stock of a company is sold. A firm "buys out" a company to take control of it. A buyout can take the form of a leveraged buyout, a venture capital buyout or a management buyout. Where the company being bought out is a public company, a buyout is often called a "going private" transaction.

The term may apply more generally to the purchase by one party of all of the rights of another party with respect to an ongoing transaction between the two. For example:

• an employer may "buy out" an employee's contract by making a single prepayment, so as to have no ongoing obligation to employ the person;

• a landlord may buy out the remainder of a tenant's lease, effectively paying them to vacate.

Contracts may have an explicit buyout provision setting forth the terms or price. In the alternative the matter may be negotiated by the parties. If the entire operation is not purchase, the remainder is referred to as a stub.