High growth firms with high reinvestment requirements often make attractive LBO targets.

Question

Quizplus · Accepted Answer

Growth firms with high reinvestment requirements usually require continuous investment to maintain growth, which may not align with the goal of reducing debt through an LBO. LBOs typically involve taking on a significant amount of debt and using the cash flow from the acquired company to repay the debt, which may not be feasible for a growth firm with high reinvestment requirements.

High Growth Firms with High Reinvestment Requirements Often Make Attractive