buyout chap4

Question 1

… typically issued by one or more banks and represents
the largest portion of debt raised for an LBO

Answer 1

Senior debt

Question 2

typically “secured” against specific company assets

Answer 2

Senior debt

Question 3

has the shortest term

Answer 3

Senior debt

Question 4

… raised in the private institutional market

Answer 4

mezzanine financing

Question 5

… raised from the public bond markets

Answer 5

high-yield bonds

Question 6

unsecured
and subordinated to senior debt in the event of bankruptcy.

Answer 6

Junior Debt

Question 7

repaid
via a single bullet payment at the end of the term.

Answer 7

Junior Debt

Question 8

… is the most junior
funding instrument

Answer 8

Equity

Question 9

A PE fund will usually hold the
vast majority or all of the …, while management will own a significant
portion of the …

Answer 9

preferred shares
common equity

Question 10

… approach relies heavily on high entry prices justified by growth projections,

Answer 10

Paying Up for Sustained Growth

Question 11

… approach prioritizes acquiring assets below intrinsic value and creating value through early intervention.

Answer 11

“Buying Right and Creating Value Early” Approach

Question 12

This arrangement allows PE firms to capitalize on the management
team’s knowledge of the target company and

Answer 12

Management Buyout (MBO)

Question 13

The acquisition process is typically led by the existing management team, showcasing their active involvement in the transaction

Answer 13

Management Buyout (MBO)

Question 14

The buyout fund’s involvement is often as a financial partner, supporting the management team’s efforts.

Answer 14

Management Buyout (MBO)

Question 15

Typical … targets have sound growth potential and the right business model but
may lack effective management.

Answer 15

MBI

Question 16

possible conflicts between
the new management team and existing employees may need to be addressed.

Answer 16

MBI

Question 17

… are by far the most common form of buyouts in mid-sized to large transactions.

Answer 17

IBOs

Question 18

In an …, the buyout is initiated by a PE firm without
the support of the incumbent or external management team.

Answer 18

IBO

Question 19

providing adequate funding

Answer 19

carve out

Question 20

reduce agency risk

Answer 20

p2p

Question 21

Significant value can be unlocked in state-owned institutions by
updating the company’s business model

Answer 21

Privatization

Question 22

Portfolio companies controlled by another buyout fund are
frequent acquisition targets and such transactions are referred to as..

Answer 22

secondary
buyouts