A leveraged buyout refers to
A)a firm restructuring itself by selling off unrelated units of the company's portfolio.
B)a firm pursuing its core competencies by seeking to build a top management team that comes from a similar background.
C)a restructuring action whereby a party buys all of the assets of a business, financed largely with debt, and takes the firm private.
D)an action where the management of the firm and/or an external party buy all of the assets of a business financed largely with equity.

Question

Quizplus · Accepted Answer

A leveraged buyout (LBO) is a type of acquisition in which an external party or the existing management of a company buys all of the assets of a business, largely financed with debt, and takes the firm private. The debt is usually collateralized by the assets of the acquired company, and the cash flows from the acquired company are used to pay down the debt. This allows the acquiring party to use a smaller amount of capital to take over a larger business, while potentially increasing the returns to equity investors.

A Leveraged Buyout Refers to