A ________ is a method of structuring a financial merger, whereas a ________ involves the sale of the firm's assets.
A) leveraged buyout; bankruptcy
B) congeneric buyout; divestiture
C) horizontal merger; leveraged divestiture
D) leveraged buyout; divestiture

Question

Quizplus · Accepted Answer

A leveraged buyout (LBO) is a method of acquiring a company using a significant amount of borrowed money to meet the cost of acquisition. In this case, the acquiring company uses the assets of the target company as collateral to secure the loan. A divestiture, on the other hand, involves the sale of the assets of the company, which may be done for various reasons, including raising funds or refocusing the company's strategy. Therefore, the most appropriate answer is D, as it correctly identifies the difference between the two concepts.

A ________ Is a Method of Structuring a Financial Merger