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Series 79: M&A, Tender Offers & Restructuring
Series 79 practice questionmediumLeveraged Buyouts

In leveraged buyouts, which company attribute is most attractive to lenders evaluating debt capacity?

  1. AVolatile cash flows
  2. BHigh capital expenditure requirements
  3. CStable and predictable cash flows✓ Correct answer
  4. DMinimal asset base
Explanation

Why CStable and predictable cash flows

Stable, predictable cash flows give lenders confidence in timely debt repayment, thus supporting higher leverage. Volatility or high capex reduces an LBO’s debt capacity.

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