Which of the following is true of a leveraged buyout?
A) It is a type of a strategic merger.
B) It is used to increase market share, which is used to maximize shareholder wealth.
C) It aims at developing monopoly control over the markets.
D) It involves the use of a large amount of debt to purchase a firm.

Question

Quizplus · Accepted Answer

A leveraged buyout (LBO) involves using a large amount of debt to acquire a company, with the goal of generating high returns for the acquiring firm's shareholders. LBOs are often used in situations where the company being acquired has valuable assets or strong cash flows, but is undervalued by the market or poorly managed. LBOs can be risky because they rely heavily on debt financing, which can be difficult to repay if the company does not generate enough cash flow to cover its obligations.

Which of the Following Is True of a Leveraged Buyout