What type of security is used to purchase a target company in a leveraged buy-out?
A) common stock
B) dividends
C) debt
D) retained earnings

Question

Quizplus · Accepted Answer

In a leveraged buy-out, the purchaser typically uses debt financing to acquire a majority stake in the target company. The debt is secured by the assets of the target company and/or the projected cash flows of the business. This allows the purchaser to control the target company with limited investment of their own capital. Common stock, dividends, and retained earnings are not typically used in a leveraged buy-out.

What Type of Security Is Used to Purchase a Target