Which of the following is the best deﬁnition of a leveraged buyout (LBOs)?
A) The complete absorption of one company by another, where the acquiring ﬁrm retains its identity and the acquired ﬁrm ceases to exist as a separate entity.
B) Going-private transactions in which a large percentage of the money used to buy the stock is borrowed. Often, incumbent management is involved.
C) Typically an agreement between ﬁrms to create a separate, co-owned entity established to pursue a joint goal.
D) A targeted stock repurchase where payments are made to potential bidders to eliminate unfriendly takeover at-tempts.
E) All publicly owned stock in a ﬁrm is replaced with complete equity ownership by a private group.

Question

Quizplus · Accepted Answer

A leveraged buyout (LBO) is a going-private transaction in which a large portion of the money used to buy the stock is borrowed. Incumbent management is often involved, and the goal is to sell off or restructure the company to generate profit for the buyers.

Which of the Following Is the Best Deﬁnition of a Leveraged