Series 79 practice questionmediumLeveraged Buyouts
In structuring an LBO, which of the following is a primary source of funds for the purchase price?
- ASenior secured debt✓ Correct answer
- BExisting target company cash flow
- CSale of target assets prior to closing
- DCommon equity issued by the seller to the acquirer
Explanation
Why A — Senior secured debt
Senior secured debt is commonly used to finance LBOs. Relying on the target's existing cash or asset sales before closing is less standard and may not be feasible.
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