LBOs = debt reduction?

CFA Level II
#1

Just came across a question who’s answer was

“A common source of value creation in leveraged buyouts is debt reduction”

Now, clearly a leveraged buyout means the buyout is leveraged, i.e. there is debt involved. Is the spirit of that answer that, a private equity firm will issue debt to buy a company, then through proper management after the acquisition - they work down that debt to below pre-acquisition levels?

Or am I missing something about the CFAI’s perspective on LBOs?

#2

bump

#3

Overleverage the firm. increase it’s value, pay off the debt, you have magnified your equity.

#4

thanks