The risk associated with overpaying is magnified for leveraged buyout transactions.

Name: The risk associated with overpaying is magnified for leveraged buyout transactions.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

In leveraged buyout transactions, a large portion of the purchase price is funded through debt financing. If the buyer overpays for the target company, it may not generate enough cash flow to cover its debt obligations. This can lead to financial distress or even bankruptcy for the buyer, magnifying the risk of overpaying.

The Risk Associated with Overpaying Is Magnified for Leveraged Buyout