VC 3

• It is the purchase of a company using a

large amount of debt or borrowed cash

to fund the acquisition.

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OFF

Answer explanation

Leveraged Buyout (LBO)

It occurs when an investor, typically a

financial sponsor acquires a controlling

interest in a company’s percentage of

the purchase price is financed through

leverage

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OFF

Answer explanation

Leveraged Buyout (LBO)

It is also considered as highly leveraged

transaction.

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OFF

Answer explanation

Leveraged Buyout (LBO)

downpayment

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OFF

Answer explanation

equity cash

mortgage is called .

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OFF

Answer explanation

debt

In LBO, the acquisition of another

company is significantly by borrowed

money like

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OFF

Answer explanation

bonds or loans.

• It occurs when the existing management

team of a company acquires all or a

significant part of the company from the

private owner or the parent company.

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OFF

Answer explanation

Management Buyout

the management itself will take over

the company.

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OFF

Answer explanation

Management Buyout

It’s attractive to managers since they can

expect greater potential rewards buy

being the owners of the business instead

of employees.

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OFF

Answer explanation

Management Buyout

Dual Nature of LBO

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OFF

Answer explanation

• Strategic industrial nature

• Financial-speculative nature