Transactions where public shareholders are bought out and the firm reverts to private status is referred to as which of the following?

Question

Quizplus · Accepted Answer

The transaction described fits the definition of a leveraged buyout (LBO). In an LBO, a group (usually a private equity firm) uses a mix of equity and borrowed funds to buy out a public company and make it private. The borrowed funds are secured by the assets of the company being acquired, which creates leverage. The public shareholders are typically bought out at a premium to the current share price.

Transactions Where Public Shareholders Are Bought Out and the Firm