Leveraged Buyouts
Study Guide Questions
Course Introduction
This course explores the financial, strategic, and operational aspects of leveraged buyouts (LBOs), focusing on the acquisition of companies using significant amounts of borrowed capital. Students will examine the structure and mechanics of LBO transactions, valuation techniques, sources of financing, and the roles of private equity sponsors and other stakeholders. The curriculum covers deal sourcing, due diligence, risk assessment, negotiation strategies, and post-acquisition value creation. Real-world case studies and financial modeling exercises help students understand the challenges and opportunities unique to the LBO environment, preparing them for careers in investment banking, private equity, and corporate finance.
Recommended Textbook
Investment Banking Valuation Leveraged Buyouts and Mergers and Acquisitions by Joshua Rosenbaum
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7 Chapters
201 Verified Questions
201 Flashcards
Source URL: https://quizplus.com/study-set/3930 Page 2
Chapter 1: Comparable Companies Analysis
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28 Verified Questions
28 Flashcards
Source URL: https://quizplus.com/quiz/78386
Sample Questions
Q1) Given the following information, what, by itself, would cause the enterprise value to equal $1,300.0mm?
\(\bullet\)Equity Value: $1,400mm
\(\bullet\)Cash: $200mm
\(\bullet\)Total Debt: $300mm
A)A $100mm decrease in debt
B)A $100mm increase in cash
C)A $200mm increase in debt
D)A $200mm increase in cash
Answer: D
Q2) Which of the following is NOT included in calculating a company's capitalization ratio?
A)Debt
B)Preferred stock
C)Equity
D)EBITDA
Answer: D
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Chapter 2: Precedent Transactions Analysis
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28 Verified Questions
28 Flashcards
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Sample Questions
Q1) In a floating ratio structure, the number of shares exchanged fluctuates in accordance with which of the following?
A)Movement of the acquirer's share price
B)Movement of the target's share price
C)Market movement
D)Sector movement
Answer: A
Q2) What situation would lead to a higher purchase price for a company?
A)Merger of equals
B)Targeted auction
C)Hostile situation
D)Private equity deal
Answer: C
Q3) Which of the following is true regarding the number of the acquirer's shares exchanged in a fixed exchange ratio structure?
A)It remains constant
B)It goes up
C)It fluctuates
D)It goes down
Answer: A
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Chapter 3: Discounted Cash Flow Analysis
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28 Flashcards
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Sample Questions
Q1) A DCF analysis is premised on the principle that the value of a company can be derived from the present value of which of the following?
A)Revenues
B)Gross profits
C)Free cash flow
D)Net working capital
Answer: C
Q2) In a DCF analysis, the target's projected FCF and terminal value are discounted to the present and summed to calculate the target's:
A)Enterprise value
B)Market cap
C)Equity value
D)Current value
Answer: A
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Page 5
Chapter 4: Leveraged Buyouts
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28 Verified Questions
28 Flashcards
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Sample Questions
Q1) A feature in the high yield market that allows the issuer to pay interest in the form of additional notes is called a:
A)Bridge loan
B)First lien
C)PIK
D)Term B loan
Q2) What can potentially be reduced or eliminated in the event that economic or operating performance declines?
A)Growth capex
B)Assets
C)Maintenance capex
D)PP&E
Q3) Investment banks typically compete to provide a financing in an LBO, the legally binding letters are called?
A)Commitment papers
B)Revolver
C)Financing papers
D)Both A and C
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Chapter 5: Lbo Analysis
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28 Flashcards
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Sample Questions
Q1) Which of the following provides an overview of the LBO analysis in a user-friendly format?
A)CIM
B)Transaction summary
C)Sensitivity analysis
D)Debt schedule
Q2) When building a pre-LBO model, a banker builds the cash flow statement through what point?
A)Operating activities
B)Financing activities
C)Investing activities
D)The cash flow statement is not built in the pre-LBO model
Q3) What is a key credit risk management concern for underwriters in an LBO?
A)Ability to pay annual interest expense
B)Ability to repay a substantial portion of bank debt
C)Optimal financing structure
D)All of the above
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Chapter 6: Sell-Side Ma
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33 Verified Questions
33 Flashcards
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Sample Questions
Q1) Which of the following buyers could potentially have limited access to the data room?
A)Direct competitor
B)Strategic buyer
C)Financial sponsor
D)All have equal access
Q2) All of the following are advantages of which auction type?
\(\bullet\)Heightens competitive dynamics
\(\bullet\)Limits potential buyers' negotiating leverage
\(\bullet\)Reduces potential business disruption
A)Broad auction
B)Targeted auction
C)Negotiated sale
D)None of the above
Q3) In which type of sale process does a seller have the least leverage?
A)Negotiated sale
B)Stock sale
C)Targeted auction
D)Broad auction
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Page 8
Chapter 7: Buy-Side Ma
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28 Flashcards
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Sample Questions
Q1) All of the following are considered cost synergies EXCEPT:
A)Head count reduction
B)Consolidation of facilities
C)Lower cost of capital
D)Economies of scale
Q2) All of the following are intangible assets EXCEPT:
A)Brand
B)Patents
C)PP&E
D)Copyrights
Q3) When an acquirer buys a target in the same or a closely related business, synergies tend to be:
A)Nonexistent
B)Greater
C)Lower
D)Unknown
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Page 9