Leveraged Buyouts Self-Quiz








In the 1980s, Bob was considered one of the top LBO investors in the country. However, over the later part of the 1980s and early 1990s, Bob was forced to close his fund’s operation and enter a new line of business. The most likely reason for Bob’s demise was:
Choice 1 a bad public impression of Bob and other venture funds in the media.
Choice 2 decreased returns from LBO investments as more funds entered the market.
Choice 3 difficulty working with management and employees at target firms.
Choice 4 All of the above were likely factors in Bobs downfall.
Paul and Hilda are considering raising an LBO fund. The form of the fund is likely to be:
Choice 1 an LLP.
Choice 2 an LLC.
Choice 3 a corporation.
Choice 4 a professional company.
BuyemUp Inc. is an LBO fund that has decided to acquire The Target Co. In most cases, BuyemUp will likely continue buying shares in The Target until:
Choice 1 word leaks to the press as to the nature of the transaction.
Choice 2 it is required to file a 13-D or face a poison pill.
Choice 3 shares go into the hands of the arbs.”
Choice 4 management begins to object and sends a proxy to shareholders.
What is another name for an LBO transaction in the case of a public company?
Choice 1 A “going under” transaction.
Choice 2 A “going private” transaction.
Choice 3 A “market maker” deal.
Choice 4 An “LBO takeover” transaction.
Nicky and Tina run an LBO fund. Currently, they are trying to exit one of the assets they have in their portfolio in order to pay a distribution to shareholders. The way that the fund would probably make the most money is to:
Choice 1 liquidate the company in a bankruptcy proceeding.
Choice 2 reissue shares of the company in an IPO.
Choice 3 sell the company to the highest bidder.
Choice 4 hold onto the company and wait for buyers to approach the firm for a deal.
The management of Changing, Inc. feels that its shares have been undervalued in the market for a long time now. The management would also like to restructure its balance sheet to exit several business lines and begin adding new lines that are more akin to its “core competencies”. To finance such a transaction, Changing, Inc’s management should probably approach:
Choice 1 an LBO fund.
Choice 2 a VC fund.
Choice 3 a secondary direct fund.
Choice 4 a large bank for a private loan.

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