Attempt Score 8 out of 10 points
Leveraged buyouts are the same as acquisitions.
True
False
The following are examples of LBOs except:
America Online and Time Warner
KKR and RJR Nabisco
KKR and Beatrice
Texas Pacific Group, Bain Capital, & Goldman Sachs and Burger King
Which of the following are desirable characteristics for LBO candidates?
Stable cash flows
Unused debt capacity
Ability to cut costs
All the above
A business deal in which all publicly owned stock in a firm is replaced with complete equity ownership
by a private group is called a:
Tender offer
LBO
Going-private transaction
Privatization transaction
The gains from LBOs are from:
Tax savings because of high debt servicing
Loss in the value to bondholders
Improved performance because of incentives to mangers and employees
All of the above
Leveraged buyouts (LBOs) almost always involve:
I. a large part of the purchase price is financed mostly by debt
II. most of the is below investment grade (junk)
III. the firm goes private and its shares are no longer traded on the open market
I only
I and II
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Attempt Score 8 out of 10 points
I and III
I, II, and III
When a leveraged buyout transaction is led by the firm's management then the transaction is called:
IPO
MBO
LBOM
CFO
Vertical strips:
Refers to acquiring targets with whom the bidder has a backward relationship
Refers to acquiring targets with whom the bidder has a forward relationship
Refers to participating in several layers of LBO financing
None of the above
Which of the following is true of senior debt?
The rate on senior debt is 2% to 3% above prime
Senior debt is usually about a quarter to a third of total LBO debt
The term is usually 5 to 10 years
All the above
Big gainers from LBOs were:
Junk bond holders
Raiders
Selling stockholders
Investment banking firms
Attempt Score 8 out of 10 points