In an LBO a private equity buyer contributes a slice of equity and borrows the rest, with the target's own cash flows servicing the debt. That is why LBO candidates tend to be stable, cash-generative businesses with low existing leverage and hard assets.
For public shareholders an LBO is a cash exit at a premium. For the market it removes float. Financing risk is the main reason these deals break: if credit markets shut, the debt commitment can fall away.
Example: a $5B buyout funded with $1.5B equity and $3.5B debt. If the buyer exits five years later at $7B with $2.5B of debt remaining, the equity turned $1.5B into $4.5B, a triple, on a 40% rise in enterprise value.
Related: going-private, management-buyout, enterprise-value, acquisition