A leveraged buyout refers to:
A) a firm restructuring itself by selling off unrelated units of the company's portfolio.
B) a firm pursuing its core competencies by seeking to build a top management team that comes from a similar background.
C) a restructuring action whereby a party buys all of the assets of a business, financed largely with debt, and takes the firm private.
D) an action where the management of the firm and/or an external party buys all of the assets of a business financed largely with equity.

Question

Quizplus · Accepted Answer

A leveraged buyout (LBO) is a restructuring action whereby a party buys all of the assets of a business, financed largely with debt, and takes the firm private. This means the buyer is using borrowed funds to acquire the company and will use the assets of the acquired company as collateral against the loan. The goal is to use the acquired company's cash flow to pay off the debt used to acquire it, and ultimately create wealth for the buyer.

A Leveraged Buyout Refers To