Practice Question
In a leveraged buyout (LBO), which of the following is NOT typically a source of financing?
Answer +
E
Step-by-step solutions +
In a leveraged buyout (LBO), the acquiring party uses a significant amount of borrowed money (debt) to finance the acquisition, often secured by the assets of the target company. Typical sources of financing include:
• Bank loans and high-yield bonds
• Equity from private equity sponsors
• Cash on hand
Government grants, however, are not a conventional or dependable source of financing for LBOs. They are rare, not market-based, and usually tied to public policy initiatives rather than private buyouts.
• Bank loans and high-yield bonds
• Equity from private equity sponsors
• Cash on hand
Government grants, however, are not a conventional or dependable source of financing for LBOs. They are rare, not market-based, and usually tied to public policy initiatives rather than private buyouts.