What is a leveraged buyout? It is a type of joint venture. It is an acquisition in which a large acquirer has leverage through bargaining power over a small target. It is an acquisition which is funded from a relatively large amount of debt. It is an acquisition which is funded from a relatively low amount of debt.

concept. A buyout is the acquisition of a controlling interest in a company Buyouts occur when a…

Answered: What is a leveraged buyout?…

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter10: Long-lived Tangible And Intangible Assets

Section: Chapter Questions

Problem 12Q

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If you are planning an acquisition that is motivated by trying to acquire expertise, you are basically seeking to gain intellectual capital. What concerns would you have in structuring the deal and the post-merger integration that would be different from the concerns you would have when buying physical capital?
In the process of determining fair value, the exit price refers to: Multiple Choice the amount the firm would receive if it sold a given asset. the amount the firm would pay if it bought an asset of the same type and condition as the one being valued. the sum of the future cash flows expected to be generated by continuing to use the asset. the expected sale price of the stock in a corporate buy-out.
a) What is a conglomerate merger and why are they more likely to be approved? b) Limit pricing is a strategy where a firm sets a low, but profitable, price to discourage entry. How does that differ from predatory pricing? c) What is "Share the gain, share the pain" theory?
What is the relevance of Leveraged buyouts (LBOs) to Mergers, Acquisitions and Divestitures?
It is quite often we observe some firms takeover target firms from a different industry. If diversifying harms firm value and it is more efficient to make diversification at the investor (shareholder) level than at the firm level, why do you think the managements still choose to make diversified acquisitions?
Which of the following is correct a. In a leveraged recapitalization, a firm uses its excess cash to buyback shares b. In an LBO, a firm borrows and repurchases its shares thereby reducng the number of shares outstanding. c. In a leveraged recapitalization, a change of ownership occurs as the firm is sold d. In an LBO, debt is a major component of the financing and a change of control occurs. e. In an LBO, managers use excess cash to repurchase shares
Leveraged buying is : a. buying a company by using its borrowing potential b. launching a hostile takeover bidc. is a cross-shareholdingd. none of the above
Why might the portfolio effect of a merger provide a higher valuation for the participating firms?
Discuss the underlying theories and empirical evidence on the value creation from horizontal mergers. How do other firm- and deal- characteristics interact with the valuation effects of such mergers?
Explain the mechanism of using financial leverage as a takeover defense tool
Suppose you are the CEO of a large firm in a service business and you think that by acquiring a certain competing firm, you can generate growth and profits at a greater rate for the combined firm. Youhave asked some financial analysts to study the proposed acquisition/merger. Do you think valuechain analysis would be useful to them? Why or why not?
What are the factors that determine whether the company should use cash acquisition or stock acquisition? Discuss five different defensive tactics that the target company can use to thwart this takeover attempt. 3) What are the possible cash flow benefits from this acquisition?

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		It is a type of joint venture.
		It is an acquisition in which a large acquirer has leverage through bargaining power over a small target.
		It is an acquisition which is funded from a relatively large amount of debt.
		It is an acquisition which is funded from a relatively low amount of debt.