Ch. 13 Planning for the Harvest Flashcards
A leveraged buyout involving the purchase of a group of similar companies with the intent of making the firms into one larger company for eventual sale or to be taken public.
build-up Leveraged Buyout (build-up LBO)
A professional who assists in the buying and selling of a business.
business broker
A leveraged buyout involving the purchase of a company with the intent of selling off its assets.
bust-up LBO
Taxation of income that occurs twice—first as corporate earnings and then as stockholder dividends.
double taxation
A trust fund that uses employee retirement contributions to buy stock in the employer’s company.
employee stock ownership plan (ESOP)
The process used by entrepreneurs and investors to reap the value of their investment in a business when they leave it.
harvesting (exiting)
The first sale of shares of a company’s stock to the public.
initial public offering (IPO)
A purchase heavily financed with debt, where the future cash flows of the target company are expected to be sufficient to meet debt repayments.
leveraged buyout (LBO)
A leveraged buyout in which the firm’s top managers become significant shareholders in the acquired firm.
management buyout (MBO)
The rate of return that could be earned on another investment of similar risk.
opportunity cost of funds
Provision of debt and equity by private equity investors that allows an entrepreneur to cash out part of his or her investment.
private equity recapitalization
Financing in which the seller accepts a note (in lieu of cash) from a buyer in partial payment for a business.
seller financing
Harvesting, or exiting, is the method that owners and investors use to get out of a business and, ideally, reap the value of their investment in the firm.
True
Harvesting is about more than merely selling and leaving a business. It involves capturing value (cash flows), reducing risk, and creating future options.
True
A firm’s appeal to investors is driven, in part, by the availability of harvest options.
True
