Which of the following tends to be true of LBOs

Question

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Leveraged Buyouts (LBOs) typically involve significant use of debt financing, where the future cash flows of the target company are used to pay off the acquisition debt. A) Management incentives are a key component of LBOs, as aligning management's interests with those of the new owners is crucial for improving operational efficiencies and financial performance. B) It's common for a substantial premium to be paid to the shareholders of the target firm in an LBO, often exceeding 40%, to incentivize them to sell. C) Tax benefits, such as the deductibility of interest payments, are an important aspect of LBOs and are factored into the financial structuring, including the purchase price premium. D) As the LBO entity pays down its acquisition debt over time, the capital structure changes, typically leading to a decrease in debt and an increase in equity value, which can alter the cost of equity.

Which of the Following Tends to Be True of LBOs