Question

The high premiums paid to LBO target shareholders reflect the tax benefits associated with the high leverage of such transactions and the improved operating efficiency

a. True
b. False

Answer 1

false

Step-by-step explanation:

Leveraged buyout is when a distressed company is acquired using a high level of debt. the high premiums paid is as a result of the high riskiness associated with leveraged buyouts.

Some of the reasons for conducting a leveraged buyout includes :

1. to turn a public company private
2. to conduct a change of ownership
3. to spin off a portion of the company