What Is Takeout?

Takeout can either refer to a loan that replaces another loan or a slang term for the purchase of a company via an acquisition, merger or buyout.

Key Takeaways

  • Takeout can either refer to a loan that replaces another loan or a slang term for the purchase of a company via an acquisition, merger or buyout.
  • A takeout loan is long-term financing that the lender promises to provide at a particular date or when particular criteria for completion of a project are met and is quite common in property development.
  • A takeout refers to the company being taken out of play, which occurs when the acquisition has been finalized.

Understanding Takeout

Takeout is a term that has several uses in the financial industry but the two main uses for this term are as a type of financing or the purchase of a company.

  1. A takeout loan is a method of financing whereby a loan that is procured later is used to replace the initial loan. More specifically, a takeout loan, or takeout financing, is long-term financing that the lender promises to provide at a particular date or when particular criteria for completion of a project are met. Takeout loans are commonly used in property development. A developer might secure a short-term loan to scrape an existing structure and pay a crew to build a new one. Once the new structure is in place or a significant portion of it is finished, the developer might secure longer term financing to pay off the original loan.
  2. Takeout, as a colloquial term, refers to the purchase of a company, be it through an acquisition, merger, or other form of buyout. The nature of the takeover does not matter. Takeout can be used in all contexts. A takeout can refer to a hostile takeover, a friendly merger, or a leveraged or management buyout. A company is said to be "in play" if it is likely to be acquired in the future, or currently has bids from purchasers. A takeout refers to the company being taken out of play, which occurs when the acquisition has been finalized.