An investor group borrowed the money necessary to buy all of the stock of a company. Which of the following terms best describes this transaction?
A) Merger
B) Consolidation
C) Leveraged buyout
D) Tender offer
E) Joint venture

Question

Quizplus · Accepted Answer

A leveraged buyout (LBO) is a transaction in which an investor group borrows the money to buy all of the outstanding stock of a company. The acquisition is primarily financed with debt, which is then paid off with future cash flow generated by the company. This type of transaction is often used by private equity firms to acquire control of a company.

An Investor Group Borrowed the Money Necessary to Buy All