Hidden Valley Communications,Inc. ,located in a remote area of Utah,made a special device that was used in 4th generation cell phones.After three years of local operations,the company that employed 4,000 people was planning to close its Utah operation and move the assembly offshore.Under the direction of a financial services company that financed the deal,the employees agreed to become owners of the company and continue to operate the business.The business concept that describes this arrangement is:
A)IPO initial public offering).
B)LBO leveraged buyout).
C)EPO equity public offering).
D)HM horizontal merger).

Question

Quizplus · Accepted Answer

The business concept that describes this arrangement is a leveraged buyout (LBO). An LBO is a financial arrangement in which a group of investors, often including the company's management team, borrow money to buy out the existing shareholders of a company, typically with the goal of taking the company private. In this case, the employees became the owners of the company through an LBO and continued to operate the business.