Leveraged buyouts (LBOs)almost always involve which of the following?
I.a large part of the purchase price is financed by debt;
II.most of the issued debt is below investment grade (i.e., junk);
III.the firm goes private and its shares are no longer traded on the open market

Question

Quizplus · Accepted Answer

All three statements are typically involved in a leveraged buyout. The large part of the purchase price being financed by debt is what makes it "leveraged." The debt is often below investment grade because the high levels of debt increase the risk of default. Finally, going private and delisting from the stock exchange allows the new owners to make significant changes without the scrutiny of public shareholders.

Leveraged Buyouts (LBOs)almost Always Involve Which of the Following