What is the main goal of a leveraged acquisition?

The main goal of a leveraged acquisition is to increase returns on equity using borrowed funds. This strategy involves using a significant amount of debt to finance the purchase of a company, which allows the acquirer to use a smaller amount of their own equity. When the acquisition generates a return that exceeds the cost of the borrowed funds, it amplifies the returns on the equity investment made by the acquirer.

In a successful leveraged acquisition, the returned money from the investment benefits primarily the equity holders, as they have invested only a fraction of the total purchase price. This can significantly enhance return metrics if the acquired company's performance improves or if synergies from the merger or acquisition can be realized. The leverage aspect introduces risk, but also the potential for higher returns, which is why it is a pursued strategy in various acquisition scenarios.