Unlike venture capital (VC) firms that invest in risky, early-stage companies, private equity (PE) firms tend to invest in mature companies that have stable and recurring cash flows which can be used to repay the debt taken on the leveraged buyout (LBO) over time (Kaplan & Strömberg, 2009). The literature states that problems of asymmetric information and adverse selection are key issues that banks consider when evaluating prospective borrowers and determining the terms of lending (Petersen & Rajan, 1994; Boot & Thakor, 2000). Previous studies on buyouts have shown that PE firms and targets address these challenges by developing strong relationships with banks, which help them obtain LBO loans on cheaper terms (Ivashina & Kovner, 2011; Shivdasani & Wang, 2011; Fang et al., 2013). However, these findings do not recognize that bank-borrower relationships are characterized by power differentials in which borrowers could have more or less bargaining power over their relationship banks depending on their access to alternative sources of financing. Since LBOs are financed largely with debt, the power differentials between PE firms and their relationship banks, and between targets and their relationship banks, could have important implications on their decision to collaborate in the LBO and on their ability to negotiate financing terms of the transaction.