Miniature Precision Corporation,a microprocessor manufacturer,recently acquired Cameron-Price,a plastics mould manufacturer.Miniature Precision financed the transaction with 90 percent borrowed money and used Cameron-Price's assets as collateral.What is this type of merger commonly known as?
A) greenmail
B) a leveraged buyout
C) an institutional takeover
D) a hostile takeover

Question

Quizplus · Accepted Answer

This type of merger is commonly known as a leveraged buyout (LBO). In an LBO, the acquiring company (in this case, Miniature Precision) borrows a large amount of money to finance the acquisition and uses the target company's assets as collateral. This allows the acquiring company to purchase the target company without using much of its own capital.

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