The Strategy of Investors Who Are Attempting a Leveraged Buyout

question 223

Multiple Choice

The strategy of investors who are attempting a leveraged buyout is to

• A) shape up the company for quick resale.
• B) use debt to finance the buyout of the firm's stockholders and gain control of the firm themselves.
• C) secure ownership of all of the existing stock in a company by issuing and selling large amounts of new stock.
• D) use investment tax credits from the government to acquire all of the physical assets owned by the firm.

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Definitions:

Proxy Contest

A situation where competing groups of shareholders solicit votes from other shareholders to win control over the company's board of directors without intending to buy the company outright.

Controlling Seats

Positions of authority in a corporation's board of directors that allow for direct influence over the company's decisions.

Shareholders

Individuals or entities that own shares in a corporation, making them partial owners of the company.

Horizontal Merger

A merger between companies in the same industry, often aiming to reduce competition or achieve economies of scale.