VC 3

• It is the purchase of a company using a

large amount of debt or borrowed cash

to fund the acquisition.

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

Answer explanation

Leveraged Buyout (LBO)

It is also considered as highly leveraged

transaction.

Answer explanation

Leveraged Buyout (LBO)

downpayment

Answer explanation

equity cash

mortgage is called .

Answer explanation

debt

In LBO, the acquisition of another

company is significantly by borrowed

money like

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.

Answer explanation

Management Buyout

the management itself will take over

the company.

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.

Answer explanation

Management Buyout

Dual Nature of LBO

Answer explanation

• Strategic industrial nature

• Financial-speculative nature