DEFINITION of 'Takeout'

Takeout is a term that has several uses in the financial industry. Takeout can refer to a type of financing or can also be used as a slang term denoting the purchase of a company through an acquisition, merger, or other form of buyout.

1) A takeout loan can be used in two contexts. First, a takeout loan can be any loan that is used to replace another 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.

2) Takeout can refer 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.

BREAKING DOWN 'Takeout'

1) 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 can refer to the purchase of a company. 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.

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