Miniature Precision Corporation, a microprocessor manufacturer, recently acquired Cameron-Price, a plastics mold manufacturer.Miniature Precision financed the transaction with 90 percent borrowed money and used Cameron-Price's assets as collateral.This type of merger is commonly known as a(n):
A)hostile takeover
B)greenmail
C)leveraged buyout
D)institutional takeover
E)financial merger

Question

Quizplus · Accepted Answer

This type of merger is known as a leveraged buyout because it involves acquiring a company using a significant amount of borrowed money to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans.

Miniature Precision Corporation, a Microprocessor Manufacturer, Recently Acquired Cameron-Price, a Plastics