The management of Corporation A forms Corporation B in which management owns some stock and institutional investors own the rest.Corporation B issues bonds to institutional investors to raise cash, with which it purchases the assets or stock of Corporation A.The assets of Corporation A are used as security for the bonds.This action by management is best described as a:
A)leveraged buyout.
B)cash-out combination.
C)short-form merger.
D)compulsory share exchange.

Question

Quizplus · Accepted Answer

This action is best described as a leveraged buyout (LBO), where a company is purchased using a significant amount of borrowed money, with the assets of the company being acquired often used as collateral for the loans.

The Management of Corporation a Forms Corporation B in Which